Fortinet Must Face 'Reality Of Constrained Demand' After Mixed Q3, Analyst Says

Shares of Fortinet Inc FTNT tanked in early trading on Friday, after the company reported mixed quarterly results.

The results came amid an exciting earnings season. Here are some key analyst takeaways from the earnings release.

• Truist Securities analyst Junaid Siddiqui maintained a Buy rating, while slashing the price target from $82 to $60.
• Guggenheim Securities analyst Raymond McDonough reiterated a Buy rating, which reducing the price target from $70 to $62.
• Needham analyst Matt Dezort reaffirmed a Hold rating on the stock.
• Oppenheimer analyst Ittai Kidron maintained a Perform rating on the stock.
• KeyBanc analyst Eric Heath reiterated a Sector Weight rating on the stock.

Check out other analyst stock ratings.

Truist Securities: Fortinet reported its third-quarter results below expectations, “amidst an increasingly challenging macro driven by continued weakness in its product revenue segment,” Siddiqui said in a note.

Management reset their full-year guidance, indicating a slowdown in the company’s core secure networking market and “elongated sales cycles amidst increased deal scrutiny,” the analyst added. “Even though we are disappointed with the weak Q3 results, we still continue to favor FTNT's balanced approach to growth and profitability making FTNT a defensible name long-term, in our view."

Guggenheim Securities: Fortinet reported weak quarterly results, with the cyclical downturn in hardware leading to “another product and billings miss,” McDonough said.

“In our view, the current cyclical downturn is likely to be steeper and shorter than the last, which lasted about eight quarters,” the analyst wrote. “This quarter and subsequent guides suggest a steeper decline, but we do believe we are more than halfway through this ‘period of digestion’."

Needam: “Fortinet corrected sharply after Q3 Billings and Product Revenue missed on a sharper than expected slowdown in secure networking appliance sales,” Dezort wrote in a note.

“The outlook also disappointed with Billings growth now expected to recover into the double-digits in 2H24, down from prior messaging for mid-teens,” the analyst stated. “Fortinet is shifting focus and reorienting their sales force toward a SASE and SecOps first motion, which is likely to take a few quarters to digest adding to the headwinds near-term."

Oppenheimer: Although Fortinet delivered an earnings beat in the third quarter, its billings and revenues were disappointing and the company lowered its full-year guidance for the second consecutive quarter, Kidron said.

“In our opinion, Fortinet must now face the reality of constrained demand in its core firewall market, which will pressure its growth moving forward,” the analyst wrote. “And while the company is shifting its focus to SASE and SecOps, these are highly competitive markets that Fortinet was late to invest in,” he added.

KeyBanc: Fortinet delivered “a large 3Q miss and guide lower on billings, revenue and product revenue as the firewall digestion period is more extensive than expected and execution remains challenging,” Heath said.

“Weakness was more pronounced in Europe, U.S., large enterprise, as well as in the service provider and retail verticals,” the analyst added.

FTNT Price Action: Shares of Fortinet had declined by 15.58% to $48.62 at the time of publication Friday.