Fortinet's Billings Growth Disappointed Analysts, They Cut Price Targets While Being Positive On Its Demand Drivers

Fortinet, Inc FTNT clocked 29% revenue growth in Q2, in line with the consensus. Product revenue was up 34% Y/Y. Bookings totaled $1.38 billion in the quarter, up 42% Y/Y. Billings hit $1.3 billion in the second quarter, up 36% Y/Y.

Barclays analyst Saket Kalia had an Overweight rating and a $77 price target, down from $80. FTNT's beat and flow through on billings was what people expected, while bookings growth came in lower than upside expectations.

BMO Capital analyst Keith Bachman had an Outperform rating and a $68 price target, down from $70. Bachman acknowledged the disappointing quarter versus his and investors' expectations as bookings dropped from the average growth level.

His estimates remained largely intact while his billings forecast moved higher and FCF forecast moved lower. He lauded the attractive valuation.

RBC analyst Dan Bergstrom had a Sector Perform rating and a $69 price target. He acknowledged broad-based strength exhibited during the quarter marking billings growth above 30% for the fifth consecutive quarter and strength in the large enterprise.

Bergstrom acknowledged robust pipelines, backlogs, and some pause during the first half, normalized by the quarter end. The guidance reflected the micro while he slightly raised his estimates.

Mizuho analyst Gregg Moskowitz reiterated a Buy with a $70 price target. He noted the impressive growth in billings and product revenues, beating the Street significantly.

Moskowitz also acknowledged Service revenue missing consensus due to the supply chain headwinds. He remained optimistic about demand drivers and Service revenue prospects.

Morgan Stanley analyst Hamza Fodderwala had an Equal-weight rating and a $66 price target. The analyst highlighted that Q2 slightly fell short of expectations.

However, Fodderwala also noted that concerns around peak firewall demand appear priced in. He believed a large backlog, higher services attached, and pricing should enable a durable 20%+ top line next year. 

Fodderwala also noted the downward revision in the FY22 services revenue outlook due to the suspension of services in Russia and higher linearity from the supply chain leading to an unchanged FY22 total revenue outlook. 

Price Action: FTNT shares traded lower by 15.5% at $53.08 on the last check Thursday.