Fortinet: A Leading Growth Stock to Watch in the Cybersecurity Space
Fortinet has emerged as a top growth stock, grabbing attention as Thursday's IBD 50 Growth Stocks To Watch. As the company extends its time in a buy zone, its remarkable performance and growth prospects make it an attractive consideration for investors. The cybersecurity giant has seen its per-share earnings double from 2021 to 2023, with expectations of continued growth this year.
- Network and cloud firewalls
- Endpoint security systems
- Intrusion detection systems
The company also offers services such as email security, web application security, identity access management, and network security analytics. Leveraging cutting-edge technology, Fortinet has integrated generative artificial intelligence into its global threat protection systems, enhancing its cybersecurity solutions.
The company holds the No. 1 spot among 33 stocks in the computer software-security group, which ranks No. 148 out of the 197 industry groups tracked by Investor's Business Daily.
On August 16, Fortinet’s stock broke out of a cup base with a 73.91 buy point, although in lighter-than-average volume. Since then, the stock has traded sideways, remaining within the 5% buy zone up to 77.61. Investors are now looking for the stock to form a bullish three-weeks-tight pattern, which could signal a continued upward trend. This week, the stock also reached a 52-week high, showing strong market support.
However, the relative strength line has shown a slight downward trend since early September, indicating potential volatility that investors should monitor closely.
Looking ahead, estimates from FactSet suggest the following:
- Third-quarter profit growth is expected at 25%.
- Growth may slow to 2% and 14% in the following quarters, with a 4% drop projected afterward.
- Sales are expected to increase by an average of 12% over the next four quarters.
- For the full-year 2024, earnings are estimated to rise by 25%, though growth may ease to 9% in 2025.
However, mutual funds have slightly reduced their positions, with 2,600 funds holding shares in June, down from 2,648 in March. The stock's Accumulation/Distribution Rating of C suggests there is an equal amount of buying and selling activity among investors, indicating a balanced market sentiment.
For more updates, follow Kimberley Koenig on X/Twitter for insights and news on the stock market.
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Fortinet has emerged as a top growth stock, grabbing attention as Thursday's IBD 50 Growth Stocks To Watch. As the company extends its time in a buy zone, its remarkable performance and growth prospects make it an attractive consideration for investors. The cybersecurity giant has seen its per-share earnings double from 2021 to 2023, with expectations of continued growth this year.
Fortinet's Services and Technological Edge
Fortinet develops and sells a wide range of security solutions, which include:- Network and cloud firewalls
- Endpoint security systems
- Intrusion detection systems
The company also offers services such as email security, web application security, identity access management, and network security analytics. Leveraging cutting-edge technology, Fortinet has integrated generative artificial intelligence into its global threat protection systems, enhancing its cybersecurity solutions.
The company holds the No. 1 spot among 33 stocks in the computer software-security group, which ranks No. 148 out of the 197 industry groups tracked by Investor's Business Daily.
Stock Performance and Market Momentum
Fortinet’s stock performance has been impressive. It has remained in a buy zone for seven weeks, with a significant gain of 25.3% on August 7, following the company's better-than-expected second-quarter earnings and sales results. This surge helped Fortinet’s shares reclaim their 50-day and 200-day moving averages, marking a strong upward movement.On August 16, Fortinet’s stock broke out of a cup base with a 73.91 buy point, although in lighter-than-average volume. Since then, the stock has traded sideways, remaining within the 5% buy zone up to 77.61. Investors are now looking for the stock to form a bullish three-weeks-tight pattern, which could signal a continued upward trend. This week, the stock also reached a 52-week high, showing strong market support.
However, the relative strength line has shown a slight downward trend since early September, indicating potential volatility that investors should monitor closely.
Financial Growth and Future Outlook
Fortinet has delivered impressive financial results, with earnings growth accelerating to 50% in the second quarter—up from 16% and 26% in the previous two quarters. Sales growth also improved, rising by 11% in Q2 following gains of 10% and 7% in earlier periods.Looking ahead, estimates from FactSet suggest the following:
- Third-quarter profit growth is expected at 25%.
- Growth may slow to 2% and 14% in the following quarters, with a 4% drop projected afterward.
- Sales are expected to increase by an average of 12% over the next four quarters.
- For the full-year 2024, earnings are estimated to rise by 25%, though growth may ease to 9% in 2025.
Investor Sentiment and Ratings
Fortinet's stock has earned a best-possible 99 Earnings Per Share (EPS) Rating from IBD, indicating robust earnings growth potential. Its Earnings Stability factor of 6 out of 99 suggests consistent earnings over the last three to five years, which is a positive sign for investors looking for reliable returns.However, mutual funds have slightly reduced their positions, with 2,600 funds holding shares in June, down from 2,648 in March. The stock's Accumulation/Distribution Rating of C suggests there is an equal amount of buying and selling activity among investors, indicating a balanced market sentiment.
Conclusion: A Strong Stock with Growth Potential
Fortinet has proven itself as a leader in the cybersecurity sector, backed by solid earnings growth, innovative technology, and strong industry positioning. While mutual fund activity and the relative strength line indicate a need for caution, Fortinet's consistent performance and position in a growing market make it a compelling growth stock to watch.For more updates, follow Kimberley Koenig on X/Twitter for insights and news on the stock market.
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