Bank of America is bullish on Fortinet, saying the cybersecurity company’s strong fundamentals allow it to achieve its long-term goals. “We believe that in the current uncertain environment, it is more prudent for investors to focus on Fortinet’s core value proposition and ignore the quarterly noise of backlog trends,” analyst Tal Liani wrote in a Monday note. “Fortinet is a leader in network security with a unique hardware approach that provides a substantial cost advantage over the competition and enables it to bundle multiple services into its platforms.” Liani upgraded Fortinent to purchase from neutral. He also raised his price target to $75 from $66, representing a 16.1% rally from where the stock closed on Friday. Liani said Fortinet’s “impressive execution” led the company to a net first quarter on all accounts. Revenue rose 30% year-over-year, the analyst noted, along with double-digit growth in orders and 30% growth in service revenue. The company also reported its highest seasonal level of operating margins, supported by “strong top-line growth, improved gross margins and favorable FX tailwinds,” Liani said. “We believe the company will continue to demonstrate a strong price/performance proposition with its custom ASIC products. We see this, along with new product introductions, as driving replacement cycles and opening up new opportunities in the high-end data center market. its competitive throughput, ” added Liani. To be sure, Liani noted concerns about pending draws. “However, the trends are solid and we highlight continued strong execution despite a challenging environment, which is indicative of the high value Fortinet provides to its customers. While the drawdown of backlog remains a reality, business momentum outweighs these concerns and underlying demand remains strong,” the analyst added. Shares of Fortinet jumped 3.2% before the market opened on Monday. Shares jumped 32.1% in 2023, with up 21.2% over the past 12 months. “The company is also expanding into new areas and the success of this strategy is evident in its financial results,” Liani said, adding that “a strong financial profile warrants a premium valuation.” —Contributed to this report CNBC’s Michael Bloom.
