In recent years, the demand for cybersecurity solutions has skyrocketed, propelled by factors such as escalating cyber threats, rapid digital transformation, and stringent regulatory mandates. The global cybersecurity market's revenue is expected to reach a staggering $183.1 billion in 2024 and register a compounded annual growth rate (CAGR) of 10.6% to reach $273.6 billion by 2028.

This bullish industry forecast could benefit cybersecurity player Fortinet, Inc. (FTNT), which is being lauded for its cloud-based security solution, FortiSASE. Fortinet shares have returned 11.5% on a YTD basis, clearly outpacing the S&P 500 Index’s ($SPX) gain of 6.2% during the same period. Despite these gains, FTNT stock trades nearly 20% below its 52-week highs.

Given this pullback, are we looking at a red flag to avoid the shares, or could it be a golden opportunity for investors to snag FTNT at a bargain? Let's have a closer look.

About Fortinet Stock

Commanding a market cap of $49.4 billion, California-based company Fortinet (FTNT) develops and sells security solutions like firewalls, endpoint security, and intrusion detection systems. The company’s expansive portfolio of over 50 enterprise-grade products offers trusted cybersecurity solutions, serving a vast clientele of more than 730,000 customers. 

Shares of Fortinet have surged 13.1% over the past six months, though the stock is slightly negative over the past 52 weeks. 

In terms of valuation, the stock is trading at 45.63 times forward earnings and 9.16 times sales, lower than its own 5-year averages and its peer Crowdstrike Holdings (CRWD).

Fortinet’s Strong Q4 Beats Wall Street Projections

Fortinet's shares surged by 3.7% on Feb. 7 after the company announced its fiscal Q4 results, which surpassed Wall Street expectations. The company’s revenue of $1.4 billion rose 10.3% year over year, marginally surpassing Wall Street estimates, while its non-GAAP EPS of $0.51 jumped 15.9%.

In fiscal Q4, Security Operations billings shot up by a whopping 44% annually, and SASE billings increased by 19%, driven by its successful sales strategy shift and the improved execution of its sales teams.

Looking ahead, management foresees revenue to range between $1.3 billion and $1.4 billion in fiscal Q1 2024, while non-GAAP EPS is forecast to be between $0.37 and $0.39. For fiscal 2024, the company anticipates revenues between $5.7 billion and $5.8 billion, while non-GAAP EPS is expected to be between $1.65 and $1.70.

Meanwhile, analysts tracking Fortinet expect the company’s GAAP profit to reach $1.39 per share in fiscal 2024 and increase by 13.7% in fiscal 2025 to $1.58 per share. The company is expected to announce fiscal Q1 2024 earnings results on Thursday, May 2.

What Do Analysts Expect for Fortinet Stock?

Analysts continue to express optimism for the company's future, despite sluggish firewall demand. According to Morgan Stanley's (MS) Hamza Fodderwala, Fortinet's Secure Access Service Edge (SASE) is gaining momentum faster than anticipated. 

Fodderwala noted strong customer interest in FortiSASE at the company’s annual conference earlier this month, suggesting ample upselling opportunities within Fortinet's extensive customer base. As a result, Morgan Stanley reaffirmed its "Overweight" rating on the stock, maintaining a price target of $81.

Fortinet stock has a consensus “Moderate Buy” rating. Out of 36 analysts covering the stock, 11 consider it a “Strong Buy,” two analysts give it a “Moderate Buy,” and the remaining 23 analysts advise a “Hold” rating.

The average analyst price target of $74.28 indicates a roughly 14% upside potential from the current price level. However, the Street-high price target of $90 suggests a 38% upside potential.