Shares of Fortinet Inc. FTNT hit a new 52-week high of $40.26 on May 28 and eventually closed at $40.18. The closing price represents a robust one-year return of 78.8% and a year-to-date return of 31.1%.
Average volume of shares traded over the last three months is roughly 1,625K. This Zacks Rank #3 (Hold) company has a market cap of $6.69B.
Share Price Drivers
Some of the optimism related to Fortinet shares may be attributed to the company’s recent definitive agreement with Meru Networks (MERU), a company which engages in the development and marketing of a virtualized wireless LAN solution. The acquisition is a positive for the company as it helps Fortinet to expand its solutions portfolio, thereby addressing the $5B worldwide enterprise Wi-Fi market with integrated and intelligent secure wireless solutions. We believe that this acquisition will not only expand its product portfolio but also its customer base.
Furthermore, Fortinet’s stock price has moved up 16% since the company announced encouraging first-quarter of 2015 results on Apr 20. The company reported better-than-expected first-quarter results, wherein both the top and bottom line surpassed the Zacks Consensus Estimate.
Fortinet’s first-quarter revenues of $212.9 million not only went up 26% from the year-ago quarter but also beat the Zacks Consensus Estimate of $204 million. The year-over-year improvement was primarily aided by solid yield on sales and marketing strategies and a strong network security market. A large number of deal wins and the addition of over 8,000 customers during the quarter also contributed to the robust top line.
Buoyed by encouraging first-quarter results, Fortinet provided an upbeat guidance for 2015 and an optimistic second-quarter outlook. The company now expects revenues in the range of $935 million–$940 million, up from $915 million–$925 million, a 22% year-over-year increase at the mid-point for fiscal 2015. The Zacks Consensus Estimate is pegged at $938 million. The company expects non-GAAP earnings per share within 49 to 50 cents, much higher than the Zacks Consensus Estimate of 22 cents.
Coming to the second-quarter 2015 outlook, management expects revenues in the range of $224 million–$228 million, a 23% year-over-year increase at the mid-point. The Zacks Consensus Estimate is pegged at $227 million. Earnings per share, on a non-GAAP basis, are anticipated within 8 to 9 cents. The Zacks Consensus Estimate is pegged at 8 cents.
Fortinet provides network security solutions, which include firewall, VPN, application control, antivirus, intrusion prevention, web filtering, anti-spam and WAN acceleration. Despite the continuing macro uncertainty, the company seems positive on a healthy network security market, its product line-up, deal wins and investment plans, which should boost results in the to-be-reported quarter.
However, continuous investments in research and development and competition from key network security players such as Cisco Systems Inc. CSCO, Check Point, Juniper Networks and Palo Alto Networks are concerns.
Stocks to Consider
Technology companies that surged to their 52-week highs yesterday include Plexus Corp. PLXS and PTC Inc. PTC, which reached $45.92 and $41.96, respectively.
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