Fortinet (FTNT), based in Calfornia, offers cybersecurity solutions to businesses and government entities around the world. It recently teamed up with Spain’s Telefónica Tech to launch a global SD-WAN security service targeting the work-from-anywhere market.
With this in mind, we used TipRanks to take a look at the newly added risk factors for Fortinet. (See Insiders’ Hot Stocks on TipRanks)
Q3 Financial Results
Fortinet reported revenue of $867.2 million for Q3 2021, surpassing the consensus estimate of $811.2 million. It reported revenue of $651.1 million in the same quarter last year. Fortinet posted adjusted EPS of $0.99, beating the consensus estimate of $0.94. It posted EPS of $0.88 in the same quarter last year.
The company ended Q3 with $1.9 billion in cash. It plans to spend $2 billion on its stock-repurchase program through February 2023 after the board expanded the program with an additional $1.25 billion.
For Q4, Fortinet anticipates revenue in the band of $940 million to $970 million. It expects adjusted EPS in the range of $1.10 to $1.15. For full-year 2021, it sees revenue coming in the range of $3.32 billion to $3.35 billion. It anticipates adjusted EPS in the band of $3.85 to $3.95 for the year.
Fortinet carries 57 risk factors, according to the new TipRanks Risk Factors tool. It recently updated its risk profile with three new risk factors.
The company has told investors that there is an increasing focus on corporate responsibility related to environmental, social and governance matters (ESG). It says that it may need to undertake expensive initiatives to satisfy investors’ and customers’ ESG expectations. It warns that if its efforts fail to the satisfy expectations, it could lose investors and customers, its business and financial condition could be adversely affected, and its reputation may be harmed.
Fortinet ended Q3 with $988 million in debt and it says it may continue to borrow. However, it has cautioned investors that servicing the debt could drive it into cash shortage problems.
Fortinet has informed investors that it has experienced shortages in the supply of raw materials and electronic components it uses in the manufacturing of its hardware products. As a result, the company’s ability to deliver orders to customers in a timely manner has been adversely impacted. Additionally, its costs are increasing as a result of shipping challenges and component shortages.
The Finance and Corporate category carries more of Fortinet’s risks than any other category, with 28% of the total risks. That is below the sector average of 44%.
Following Fortinet’s Q3 earnings report, Deutsche Bank analyst Patrick Colville reiterated a Hold rating on Fortinet stock. The analyst also raised the price target on the stock to $320 from $293. However, Colville’s new price target suggests 5.5% downside potential.
The analyst noted that the cybersecurity market remains healthy, and Fortinet is executing well. Furthermore, Colville observed that Fortinet’s share of the firewall market is growing, and the company is making gains in the fast-growing SD-WAN market.
Consensus among analysts is a Moderate Buy based on 12 Buys and seven Holds. The average Fortinet price target of $371.74 implies 9.9% upside potential to current levels.