Fortinet FTNT is a stock that investors should consider adding to their portfolio to shrug off the prevailing highly volatile market environment and make some gains from its upside potential.
Since the beginning of 2022, Wall Street has been witnessing high volatility due to several ongoing economic issues, including aggressive interest rate hikes by the Federal Reserve, the Russia-Ukraine war-led energy crisis, and persistent inflation since last year. On top of tightening Fed policies, the outbreak of new coronavirus variants remains a key concern among investors.
Such geopolitical uncertainties are likely to continue weighing on investors’ sentiments, which might lead to higher volatility in the U.S. equity market. Year to date (YTD), the Dow Jones Industrial Average, Nasdaq Composite and S&P 500 have plunged 9.3%, 20.5% and 13.1%, respectively. In such a scenario, top-ranked stocks like Fortinet can boost one’s portfolio.
Fortinet, Inc. Price and Consensus
Fortinet, Inc. price-consensus-chart | Fortinet, Inc. Quote
Why is FTNT an Attractive Pick?
Trading Way Below 52-Week High: Fortinet stock currently trades lower than its 52-week high, which reflects its potential to go upward. The stock’s closing price of $50.16 on Aug 24 is 32.5% lower than the 52-week high of $74.35 attained on Dec 29, 2021. Shares of FTNT have plunged 30.2% year-to-date compared with the Zacks Security industry’s decline of 10.4%.
Solid Rank & VGM Score: Fortinet currently has a Zacks Rank #2 (Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities to investors. Thus, the company appears to be a compelling investment proposition at the moment.
Positive Earnings Surprise History: FTNT has an impressive earnings surprise history. The company outpaced estimates in each of the trailing four quarters, the average surprise being 10.3%.
Strong Earnings Growth Potential: The Zacks Consensus Estimate of $1.04 per share for 2022 earnings suggests year-over-year growth of approximately 30%. The consensus mark for 2023 earnings stands at $1.28 per share, indicating a year-over-year surge of 22.8%. Moreover, the long-term expected earnings growth rate for the stock is pegged at 18%, above the industry’s 14.2%.
Robust Fundamental Growth Drivers: Fortinet is benefiting from the increased adoption of its networking and security platforms, driven by a rise in the remote working policy among top-notch companies. The cyber security firm continues to win back-to-back deals for offering unique cyber safety solutions, which ensure the blocking of attacks or malicious content. Its Fortinet Security Fabric, cloud and Software-defined Wide Area Network (SD-WAN) offerings are currently witnessing robust growth.
Per the International Data Corporation, Fortinet ranks third in Unified Threat Management (“UTM”) in terms of revenues and holds a market share of approximately 14.3% in the network security appliances market (as of September 2021). According to industry analysis, the category is believed to be one of the fastest growing segments in Network Security with projected growth in the range of high-single to low-double digits. Given the company’s sustained focus on enhancing its UTM portfolio through product development and acquisitions, we believe Fortinet will continue to increase its market share in the segment and retain its leading position.
Besides, the growing adoption of SD-WAN solutions stands as a key growth driver for Fortinet in the long run. According to the latest Future Market Insights report, the market size for SD-WAN solutions is likely to reach $53.8 billion by 2032 from $3.4 billion in 2022, indicating a CAGR of 31.6% during the 2022-2032 forecast period. As there are only a few vendors that offer security and SD-WAN solution, Fortinet is well-positioned to capitalize on the increasing opportunities in the market.
On top of that, the company is currently focusing on selling more subscription-based services, which, in turn, are helping it to generate stable revenues while expanding margins. It is also bolstering the customer base of Fortinet. We believe that the subscription-based business model will continue to improve the company’s top and bottom-line performances.
Other Stocks to Consider
Some other top-ranked stocks from the broader Computer and Technology sector are Clearfield CLFD, Silicon Laboratories SLAB and Taiwan Semiconductor TSM. While Clearfield and Silicon Laboratories flaunt a Zacks Rank #1, TSM carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Clearfield’s fourth-quarter fiscal 2022 earnings has been revised 10 cents north to 80 cents per share over the past 30 days. For fiscal 2022, earnings estimates have moved 36 cents north to $3.13 per share in the past 30 days.
Clearfield’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 33.9%. Shares of CLFD have increased 50.8% over YTD.
The Zacks Consensus Estimate for Silicon Laboratories’ third-quarter 2022 earnings has increased 22.9% to $1.02 per share over the past 30 days. For 2022, earnings estimates have moved 14.2% up to $4.18 per share in the past 30 days.
Silicon Laboratories’ earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 63.6%. Shares of SLAB have decreased 34.9% over YTD.
The Zacks Consensus Estimate for Taiwan Semiconductor’s third-quarter 2022 earnings has been revised a penny southward to $1.69 per share over the past 30 days. For 2022, earnings estimates have moved 41 cents north to $6.30 per share in the past 60 days.
TSM’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 3.9%. Shares of the company have decreased 28.9% over YTD.
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