Fortinet Analyst Touts It An Underappreciated 30% FCF Compounder

Morgan Stanley analyst Hamza Fodderwala upgraded his rating of Fortinet, Inc FTNT to Overweight (from Equalweight) and increased his price target to $69 from $66.
He highlighted that security demand remains durable in an uncertain macro as corporates invest in bolstering their defenses against rising threats in an October 7 note titled "Fortinet Inc.: An Underappreciated 30% FCF Compounder."
While investors are concerned with the cyclical nature of the firewall business, he believes this materially underestimates Fortinet's secular growth drivers (SD-WAN, OT Security), accelerating share gain and opportunity to consolidate >$100 billion in the annual market spend across security and networking.
With just 5% revenue penetration, this should drive a durable 20%+ topline CAGR over the next five years.
Nearer term, with his recent checks indicating durable demand and a large backlog exiting this year, he sees a meaningful upside to forward consensus estimates.
Hamza notes three main takeaways. They include core secular drivers remaining underappreciated, a significant upside to forward estimates, and handsome capital return and FCF valuation.
Price Action: FTNT shares traded lower by 0.55% at $51.19 on the last check Monday.
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