Fortinet Could Be One Of The Most Undervalued Cybersecurity Plays

seekingalpha07-09

Cybersecurity market expected to double to $128.99 billion by 2030.Fortinet has potential for growth despite recent decline in stock price.FTNT operates high-margin business with strong profitability,...

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MaxGain
07-10
MaxGain
I sure hope that you are right, because depending on Gartner Magic Quandrant as one of the measurements weak, since I am of the opinion that as long as you 'collaborate' enough with Gartner, being in the quadrant is never a problem. Also, Fortinet hasn't been innovating lately and it has been lagging behind in the AI powered Cybersecurity space, other than re packaging it's dated solutions in a (imho) fake AI wrapper and pushing it out on a desperate attempt to look as though they have it too.

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21:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4702826-fortinet-could-be-one-of-the-most-undervalued-cybersecurity-plays><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Cybersecurity market expected to double to $128.99 billion by 2030.Fortinet has potential for growth despite recent decline in stock price.FTNT operates high-margin business with strong profitability,...</p>\n\n<a href=\"https://seekingalpha.com/article/4702826-fortinet-could-be-one-of-the-most-undervalued-cybersecurity-plays\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"IE00BJJMRY28.SGD","symbol_name":"Janus Henderson Balanced A Inc 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MF3dThere are many different investment methodologies, from generating passive income to capital appreciation. Many investors missed the incredible run by NVIDIA Corporation (NVDA) and are looking for the next big idea outside of the Magnificent Seven. One of the areas I am focusing on is cybersecurity, as I believe the bull market in this sector is just getting started. The U.S. cybersecurity market is expected to grow to $128.99 billion by 2030, which is roughly double from its $59.96 billion value in 2022. The global cybersecurity market had an estimated value of $222.66 billion in 2023 and is forecasted to grow at a 12.3% compound annual growth rate through 2030. This would place the global cybersecurity market's annualized spend at $501.53 billion in 2030. The amount of capital companies and governments are expected to deploy as cyber threats become more complex is massive. While companies like CrowdStrike Holdings (CRWD) have been generating market-beating returns for investors over the past year, one particular cybersecurity company has been left out of the rally. Unlike how CRWD has appreciated by 168% over the past year, Fortinet (NASDAQ:FTNT) has declined by -17.79%. When I look at which Cybersecurity companies have the potential to outperform in the 2nd half of 2024 and into 2025, FTNT is at the top of my list. I think many investors are focusing on CRWD and Palo Alto Networks (PANW) as these are the two largest holdings in the Global X Cybersecurity ETF (BUG) without looking at where value can be unlocked. I have increased my position in FTNT and I am writing covered calls on the position to generate income along the way. I plan on adding to my position in FTNT over time, as I believe there is a tremendous amount of upside to be unlocked.   Seeking AlphaFollowing up on my previous article about Fortinet  At the beginning of 2024, I wrote an article about FTNT prior to becoming a shareholder (can be read here). At the time, shares were trading for $58.10 and climbed past $70 in March, only to retrace around the $60 level. During the year, shares of FTNT appreciated by 5.15% while the S&P 500 climbed by 17.32%. In that article, I had discussed why I was interested in FTNT and how they were positioned to gain market share in a growing sector. I am following up with a new article as their 2023 fiscal year is in the books, and there is more financial data on the company. I think FTNT is an undervalued gem with massive growth ahead of it. I have been increasing my position and think FTNT could shock investors that are focused on the bigger cybersecurity names that are grabbing all the headlines.   Seeking AlphaRisks to investing in Fortinet  While FTNT delivered strong Q1 2024 earnings, shares sold off after a billings miss in Q1 and weaker-than-expected billings guidance for Q2. The real risk to investing in FTNT is that competitors take market share away from FTNT. FTNT may not be as well-known as Cisco Systems (CSCO), PANW, or CRWD, which could present a problem when Chief Technology Officers look to add hardware or services to their IT infrastructure. While the sector is expected to double by 2030, FTNT is competing against extremely strong competitors. CSCO just acquired Splunk, and if customers gravitate to product offerings from other companies, then FTNT's projected growth rates could be in jeopardy, which could significantly impact my bull thesis. Why I believe Fortinet can compete with the largest cybersecurity companies in the market Cybersecurity isn't a sector where there is a winner-take-all-all outcome or even a duopoly scenario. There are many different segments of cybersecurity, including hardware, endpoint security, network security, cloud security, and system management. Some companies are known for their hardware, and others are known for their enterprise-level software solutions. Companies like CSCO have diversified their product mix to extend past hardware to include software and subscription offerings. FTNT is recognized as a leader in several areas and has a product mix that reaches both networking and security. FTNT continues to find itself favorably positioned in research reports from reputable analyst firms, including Gartner, IDS, and Forrester. FTNT has been named in 5 of Gartner's Magic Quadrant reports, where they were a leader in network firewalls, SD-Wan, and WLAN and a challenger in single-vendor SASE and Security Service Edge. FTNT also gained an honorable mention in Access Management and was considered a visionary in Enterprise LAN. If FTNT wasn't at the top of the food chain, they wouldn't be named in more than 100 research reports from the major analyst firms or scored such high marks in the Gartner Magic Quadrants.   Fortinet What gets me excited about FTNT is that they developed a single operation system called FortiOS that includes full networking and security combination to provide SD-Wan and firewall technologies with their secure web gateway. FTNT's unified SASE is built into FortiOS, which can be deployed on-prem or via the cloud to offer secure computing and better customer performance. When it comes to total billings, 24% was derived from unified SASE in Q1 for FTNT. On the Q1 earnings call, management explained that billings were down 6% because of the backlog contribution to billings in the previous year. FTNT is becoming a well-rounded cybersecurity company as unified SASE revenue increased YoY by 30% within their services, and software license revenue increased 20% YoY. FTNT announced a 7-figure deal as they locked in an 800-location hotel and restaurant chain for their SD-Wan products, and a large U.S. financial institution inked an 8-figure deal with FTNT to overhaul their data centers. FTNT is winning deals against its competitors, increasing its revenue, and scoring high on analyst reports. I think there is a lot to be excited about as FTNT is in a position to gain market share in an industry that is expected to grow at a double-digit annualized pace. When I look at FTNT's profitability and forward earnings, its stock looks significantly undervalued I cannot stress this enough: whenever you invest into a company, you are paying the current value of all the future cash flow they will produce. I want to pay the best price today for a company's future profitability. I am not sure how closely investors are looking at FTNT's financials compared to competitors like CRWD. FTNT has scaled a high-margin business without taking on excessive debt. They currently have $3.02 billion in liquidity on hand between cash and short-term investments, with another $36 million in long-term investments. FTNT only has $993 million in long-term debt on the books, with just $1.08 billion in total debt. FTNT has been utilizing its profitability to reward shareholders, and since the close of the 2019 fiscal year, FTNT has repurchased 98.7 million shares, which is 11.44% of the shares outstanding. I love investing in businesses that have big margins, are extremely profitable, and are expected to grow. Today, CRWD has a market cap of $94.83 billion compared to $46.67 billion for FTNT, but their financials are inferior, in my opinion. In the TTM, FTNT has generated $5.4 billion in revenue, which is $2.11 billion more than CRWD. FTNT has produced $4.16 billion in gross profit compared to $2.47 billion for CWRD, which places its gross profit margin 1.84% above CWRD's, at 77.13%. FTNT operates an extremely high-margin business as its gross profit margin is above 75%. When I look at profitability, FTNT generated $1.26 billion more in operating income than CRWD, and its operating margin was 23.80% compared to 0.74% for CRWD. FTNT generated $1.19 billion in net income, which was a profit margin of 22.23% compared to CWRD's 4% profit margin. The only metric that CRWD outpaced FTNT on that I looked at was its free cash flow (FCF) yield, as CWRD operated at a 33.03% margin compared to 31.37% for FTNT. It's hard not to get excited about FTNT as it's valued at less than half CWRD from a market cap perspective while its profitability and margins are much stronger.   Steven Fiorillo, Seeking AlphaFTNT generates billions in profitability and operates at a high margin, but if there isn't forward growth then many investors and the market won't give it a premium. When I look at the forward growth for FTNT compared to its peers and take their margins into consideration, it looks very undervalued. FTNT is trading at 34.71 times 2024 earnings, while CRWD trades at 97.18 times and PANW trades at 61.31 times. The market isn't giving FTNT anywhere near the same multiple as its peers. Looking out to 2026, FTNT is expected to grow its EPS by 32.39%, which is more than PANW, and is trading at 26.22 times 2026 earnings. On a forward basis, CRWD trades at 60.32 times, and PANW trades at 47.18 times 2026 earnings. While FTNT is only expected to grow its earnings by 7.84% YoY in 2024, it gets back to double-digit EPS growth in 2025 and is expected to grow at a double-digit pace for the foreseeable future. I think that FTNT is a steal at these levels and that their profitability and growth will be rewarded in the future.   Steven Fiorillo, Seeking Alpha  Seeking AlphaConclusion  I believe that FTNT is an undervalued gem in a sector that is expanding rapidly. FTNT is expected to grow its profitability, and since there is less debt than cash on the books, I expect that it will continue to reward shareholders through an extended share repurchase program. FTNT is trading at less than 30 times 2026 earnings, has more than 30% EPS growth over the next 2 years, and is operating a high-margin business with a gross profit margin exceeding 75% and a profit margin exceeding 20%. FTNT is in a position to grow its market share and possibly beat the future consensus EPS estimates as they are being named as a leader in more cybersecurity segments. I think that FTNT is a dark horse that can outshine its peers and provide a lot of upside potential for its shareholders.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":326021793955880,"gmtCreate":1720619377762,"gmtModify":1720688813395,"author":{"id":"3575426937784230","authorId":"3575426937784230","name":"MaxGain","avatar":"https://static.tigerbbs.com/1e7ec5528a5a65cfeab0826428adcb08","vip":1,"crmLevel":1,"crmLevelSwitch":0,"idStr":"3575426937784230","authorIdStr":"3575426937784230"},"htmlText":"I sure hope that you are right, because depending on Gartner Magic Quandrant as one of the measurements weak, since I am of the opinion that as long as you 'collaborate' enough with Gartner, being in the quadrant is never a problem. Also, Fortinet hasn't been innovating lately and it has been lagging behind in the AI powered Cybersecurity space, other than re packaging it's dated solutions in a (imho) fake AI wrapper and pushing it out on a desperate attempt to look as though they have it too.&nbsp;","listText":"I sure hope that you are right, because depending on Gartner Magic Quandrant as one of the measurements weak, since I am of the opinion that as long as you 'collaborate' enough with Gartner, being in the quadrant is never a problem. Also, Fortinet hasn't been innovating lately and it has been lagging behind in the AI powered Cybersecurity space, other than re packaging it's dated solutions in a (imho) fake AI wrapper and pushing it out on a desperate attempt to look as though they have it too.&nbsp;","text":"I sure hope that you are right, because depending on Gartner Magic Quandrant as one of the measurements weak, since I am of the opinion that as long as you 'collaborate' enough with Gartner, being in the quadrant is never a problem. Also, Fortinet hasn't been innovating lately and it has been lagging behind in the AI powered Cybersecurity space, other than re packaging it's dated solutions in a (imho) fake AI wrapper and pushing it out on a desperate attempt to look as though they have it too.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/326021793955880","repostId":2450704782,"repostType":2,"repost":{"id":"2450704782","kind":"highlight","pubTimestamp":1720530000,"share":"https://ttm.financial/m/news/2450704782?lang=&edition=fundamental","pubTime":"2024-07-09 21:00","market":"sg","language":"en","title":"Fortinet Could Be One Of The Most Undervalued Cybersecurity Plays","url":"https://stock-news.laohu8.com/highlight/detail?id=2450704782","media":"seekingalpha","summary":"Cybersecurity market expected to double to $128.99 billion by 2030.Fortinet has potential for growth despite recent decline in stock price.FTNT operates high-margin business with strong profitability,","content":"<html><body><ul><li>Cybersecurity market expected to double to $128.99 billion by 2030.</li><li>Fortinet has potential for growth despite recent decline in stock price.</li><li>FTNT operates high-margin business with strong profitability, undervalued compared to competitors.</li></ul><figure><picture> <img fetchpriority=\"high\" height=\"864px\" sizes=\"(max-width: 768px) calc(100vw - 36px), (max-width: 1024px) calc(100vw - 132px), (max-width: 1200px) calc(66.6vw - 72px), 600px\" src=\"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1435982983/image_1435982983.jpg?io=getty-c-w750\" srcset=\"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1435982983/image_1435982983.jpg?io=getty-c-w1536 1536w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1435982983/image_1435982983.jpg?io=getty-c-w1280 1280w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1435982983/image_1435982983.jpg?io=getty-c-w1080 1080w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1435982983/image_1435982983.jpg?io=getty-c-w750 750w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1435982983/image_1435982983.jpg?io=getty-c-w640 640w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1435982983/image_1435982983.jpg?io=getty-c-w480 480w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1435982983/image_1435982983.jpg?io=getty-c-w320 320w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1435982983/image_1435982983.jpg?io=getty-c-w240 240w\" width=\"1536px\"/> </picture><figcaption> <p>MF3d</p></figcaption></figure><p>There are many different investment methodologies, from generating passive income to capital appreciation. Many investors missed the incredible run by NVIDIA Corporation (NVDA) and are looking for the next big idea outside of the Magnificent Seven. One of the areas<span> I am focusing on is cybersecurity, as I believe the bull market in this sector is just getting started. The </span>U.S. cybersecurity market<span> is expected to grow to $128.99 billion by 2030, which is roughly double from its $59.96 billion value in 2022. The </span>global cybersecurity market<span> had an estimated value of $222.66 billion in 2023 and is forecasted to grow at a 12.3% compound annual growth rate through 2030. This would place the global cybersecurity market's annualized spend at $501.53 billion in 2030. The amount of capital companies and governments are expected to deploy as cyber threats become more complex<span> is massive. While companies like CrowdStrike Holdings (</span></span>CRWD<span>) have been generating market-beating returns for investors over the past year, one particular cybersecurity company has been left out of the rally. Unlike how CRWD has appreciated by 168% over the past year, Fortinet (</span><span>NASDAQ:FTNT</span><span>) has declined by -17.79%. When I look at which Cybersecurity companies have the potential to outperform in the 2</span><sup>nd</sup><span> half of 2024 and into 2025, FTNT is at the top of my list. I think many investors are focusing on CRWD and <a href=\"https://laohu8.com/S/PANW\">Palo Alto Networks</a> (</span>PANW<span>) as these are the two largest holdings in the <a href=\"https://laohu8.com/S/BUG\">Global X Cybersecurity ETF</a> (</span>BUG<span>) without looking at where value can be unlocked. I have increased my position in FTNT and I am writing covered calls on the position to generate income along the way. I plan on adding to my position in FTNT over time, as I believe there is a tremendous amount of upside to be unlocked.</span></p> <figure contenteditable=\"false\"><picture> <span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/7/7/12629971-17203763396843655.png\"/></span> </picture><figcaption><p><span>Seeking Alpha</span></p></figcaption></figure><h2><strong>Following up on my previous article about Fortinet </strong></h2> <p>At the beginning of 2024, I wrote an article about FTNT prior to becoming a shareholder (can be read here). At the time, shares were trading for $58.10 and climbed past $70 in March, only to retrace around the $60 level. During the year, shares of FTNT appreciated by 5.15% while the S&amp;P 500 climbed by 17.32%. In that article, I had discussed why I was interested in FTNT and how they were positioned to gain market share in a growing sector. I am following up with a new article as their 2023 fiscal year is in the books, and there is more financial data on the company. I think FTNT is an undervalued gem with massive growth ahead of it. I have been increasing my position and think FTNT could shock investors that are focused on the bigger cybersecurity names that are grabbing all the headlines.</p> <figure contenteditable=\"false\"><picture> <span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/7/7/12629971-17203763391289487.png\"/></span> </picture><figcaption><p><span>Seeking Alpha</span></p></figcaption></figure><h2><strong>Risks to investing in Fortinet </strong></h2> <p>While FTNT delivered strong Q1 2024 earnings, shares sold off after a billings miss in Q1 and weaker-than-expected billings guidance for Q2. The real risk to investing in FTNT is that competitors take market share away from FTNT. FTNT may not be as well-known as Cisco Systems (CSCO), PANW, or CRWD, which could present a problem when Chief Technology Officers look to add hardware or services to their IT infrastructure. While the sector is expected to double by 2030, FTNT is competing against extremely strong competitors. CSCO just acquired Splunk, and if customers gravitate to product offerings from other companies, then FTNT's projected growth rates could be in jeopardy, which could significantly impact my bull thesis.</p> <h2><strong>Why I believe Fortinet can compete with the largest cybersecurity companies in the market</strong></h2> <p>Cybersecurity isn't a sector where there is a winner-take-all-all outcome or even a duopoly scenario. There are many different segments of cybersecurity, including hardware, endpoint security, network security, cloud security, and system management. Some companies are known for their hardware, and others are known for their enterprise-level software solutions. Companies like CSCO have diversified their product mix to extend past hardware to include software and subscription offerings. FTNT is recognized as a leader in several areas and has a product mix that reaches both networking and security. FTNT continues to find itself favorably positioned in research reports from reputable analyst firms, including Gartner, IDS, and Forrester. FTNT has been named in 5 of Gartner's Magic Quadrant reports, where they were a leader in network firewalls, SD-Wan, and WLAN and a challenger in single-vendor SASE and Security Service Edge. FTNT also gained an honorable mention in Access Management and was considered a visionary in Enterprise LAN. If FTNT wasn't at the top of the food chain, they wouldn't be named in more than 100 research reports from the major analyst firms or scored such high marks in the Gartner Magic Quadrants.</p> <figure contenteditable=\"false\"><picture> <span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/7/7/12629971-17203763397737668.png\"/></span> </picture><figcaption><p><span>Fortinet </span></p></figcaption></figure><p>What gets me excited about FTNT is that they developed a single operation system called FortiOS that includes full networking and security combination to provide SD-Wan and firewall technologies with their secure web gateway. FTNT's unified SASE is built into FortiOS, which can be deployed on-prem or via the cloud to offer secure computing and better customer performance. When it comes to total billings, 24% was derived from unified SASE in Q1 for FTNT. On the Q1 earnings call, management explained that billings were down 6% because of the backlog contribution to billings in the previous year. FTNT is becoming a well-rounded cybersecurity company as unified SASE revenue increased YoY by 30% within their services, and software license revenue increased 20% YoY. FTNT announced a 7-figure deal as they locked in an 800-location hotel and restaurant chain for their SD-Wan products, and a large U.S. financial institution inked an 8-figure deal with FTNT to overhaul their data centers. FTNT is winning deals against its competitors, increasing its revenue, and scoring high on analyst reports. I think there is a lot to be excited about as FTNT is in a position to gain market share in an industry that is expected to grow at a double-digit annualized pace.</p> <h2><strong>When I look at FTNT's profitability and forward earnings, its stock looks significantly undervalued</strong></h2> <p>I cannot stress this enough: whenever you invest into a company, you are paying the current value of all the future cash flow they will produce. I want to pay the best price today for a company's future profitability. I am not sure how closely investors are looking at FTNT's financials compared to competitors like CRWD. FTNT has scaled a high-margin business without taking on excessive debt. They currently have $3.02 billion in liquidity on hand between cash and short-term investments, with another $36 million in long-term investments. FTNT only has $993 million in long-term debt on the books, with just $1.08 billion in total debt. FTNT has been utilizing its profitability to reward shareholders, and since the close of the 2019 fiscal year, FTNT has repurchased 98.7 million shares, which is 11.44% of the shares outstanding.</p> <p>I love investing in businesses that have big margins, are extremely profitable, and are expected to grow. Today, CRWD has a market cap of $94.83 billion compared to $46.67 billion for FTNT, but their financials are inferior, in my opinion. In the TTM, FTNT has generated $5.4 billion in revenue, which is $2.11 billion more than CRWD. FTNT has produced $4.16 billion in gross profit compared to $2.47 billion for CWRD, which places its gross profit margin 1.84% above CWRD's, at 77.13%. FTNT operates an extremely high-margin business as its gross profit margin is above 75%. When I look at profitability, FTNT generated $1.26 billion more in operating income than CRWD, and its operating margin was 23.80% compared to 0.74% for CRWD. FTNT generated $1.19 billion in net income, which was a profit margin of 22.23% compared to CWRD's 4% profit margin. The only metric that CRWD outpaced FTNT on that I looked at was its free cash flow (FCF) yield, as CWRD operated at a 33.03% margin compared to 31.37% for FTNT. It's hard not to get excited about FTNT as it's valued at less than half CWRD from a market cap perspective while its profitability and margins are much stronger.</p> <figure contenteditable=\"false\"><picture> <span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/7/7/12629971-1720376339344009.png\"/></span> </picture><figcaption><p><span>Steven Fiorillo, Seeking Alpha</span></p></figcaption></figure><p>FTNT generates billions in profitability and operates at a high margin, but if there isn't forward growth then many investors and the market won't give it a premium. When I look at the forward growth for FTNT compared to its peers and take their margins into consideration, it looks very undervalued. FTNT is trading at 34.71 times 2024 earnings, while CRWD trades at 97.18 times and PANW trades at 61.31 times. The market isn't giving FTNT anywhere near the same multiple as its peers. Looking out to 2026, FTNT is expected to grow its EPS by 32.39%, which is more than PANW, and is trading at 26.22 times 2026 earnings. On a forward basis, CRWD trades at 60.32 times, and PANW trades at 47.18 times 2026 earnings. While FTNT is only expected to grow its earnings by 7.84% YoY in 2024, it gets back to double-digit EPS growth in 2025 and is expected to grow at a double-digit pace for the foreseeable future. I think that FTNT is a steal at these levels and that their profitability and growth will be rewarded in the future.</p> <figure contenteditable=\"false\"><picture> <span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/7/7/12629971-17203763419798129.png\"/></span> </picture><figcaption><p><span>Steven Fiorillo, Seeking Alpha</span></p></figcaption></figure><figure contenteditable=\"false\"><picture> <span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/7/7/12629971-1720376339386901.png\"/></span> </picture><figcaption><p><span>Seeking Alpha</span></p></figcaption></figure><h2><strong>Conclusion</strong></h2> <div></div> <p>I believe that FTNT is an undervalued gem in a sector that is expanding rapidly. FTNT is expected to grow its profitability, and since there is less debt than cash on the books, I expect that it will continue to reward shareholders through an extended share repurchase program. FTNT is trading at less than 30 times 2026 earnings, has more than 30% EPS growth over the next 2 years, and is operating a high-margin business with a gross profit margin exceeding 75% and a profit margin exceeding 20%. FTNT is in a position to grow its market share and possibly beat the future consensus EPS estimates as they are being named as a leader in more cybersecurity segments. I think that FTNT is a dark horse that can outshine its peers and provide a lot of upside potential for its shareholders.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Fortinet Could Be One Of The Most Undervalued Cybersecurity Plays</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; 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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nFortinet Could Be One Of The Most Undervalued Cybersecurity Plays\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-07-09 21:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4702826-fortinet-could-be-one-of-the-most-undervalued-cybersecurity-plays><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Cybersecurity market expected to double to $128.99 billion by 2030.Fortinet has potential for growth despite recent decline in stock price.FTNT operates high-margin business with strong profitability,...</p>\n\n<a href=\"https://seekingalpha.com/article/4702826-fortinet-could-be-one-of-the-most-undervalued-cybersecurity-plays\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1435982983/image_1435982983.jpg","relate_stocks":{"IE00BJJMRY28.SGD":"Janus Henderson Balanced A Inc SGD","IE00B894F039.SGD":"Legg Mason ClearBridge - US Aggressive Growth A Acc SGD-H","LU0170899867.USD":"EASTSPRING INVESTMENTS WORLD VALUE EQUITY  \"A\" (USD) ACC","BK4525":"远程办公概念","SG9999002224.SGD":"Allianz Global High Payout SGD","CRWD":"CrowdStrike Holdings, Inc.","IE00BDCRKT87.USD":"PINEBRIDGE GLOBAL DYNAMIC ASSET ALLOCATION \"ADC\" (USD) INC","LU2106854487.HKD":"ALLIANZ THEMATICA \"AMG\" (HKD) INC","BK4528":"SaaS概念","BK4549":"软银资本持仓","LU2023250843.SGD":"Allianz Thematica Cl AT Acc H2-SGD","BK4527":"明星科技股","LU1066053197.SGD":"HSBC GIF GLOBAL EQUITY VOLATILITY FOCUSED \"AM3\" (SGDHDG) INC","LU0289961442.SGD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"AX\" (SGD) ACC","BK4529":"IDC概念","LU1585245621.USD":"EASTSPRING INV GLOBAL LOW VOLATILITY EQUITY FUND \"A\" (USD) ACC B","IE00BKVL7J92.USD":"Legg Mason ClearBridge - US Equity Sustainability Leaders A Acc USD","LU1169590202.USD":"ALLSPRING (LUX)  U.S. SELECT EQUITY \"I\" (USD) ACC","LU2023250504.SGD":"Allianz Thematica Cl AMg DIS H2-SGD","NVDA":"英伟达","IE0004445015.USD":"JANUS HENDERSON BALANCED \"A2\" (USD) ACC","LU0072462426.USD":"贝莱德全球配置 A2","BK4532":"文艺复兴科技持仓","BK4592":"伊斯兰概念","LU0238689110.USD":"贝莱德环球动力股票基金","IE00BSNM7G36.USD":"NEUBERGER BERMAN SYSTEMATIC GLOBAL SUSTAINABLE VALUE \"A\" (USD) ACC","IE00B3M56506.USD":"NEUBERGER BERMAN EMERGING MARKETS EQUITY \"A\" (USD) ACC","LU0353189763.USD":"ALLSPRING  US ALL CAP GROWTH FUND \"I\" (USD) ACC","PANW":"Palo Alto Networks","BK4551":"寇图资本持仓","SG9999002232.USD":"Allianz Global High Payout USD","FTNT":"飞塔信息","BK4211":"区域性银行","CSCO":"思科","BUG":"Global X Cybersecurity ETF","LU1046421795.USD":"富达环球科技A-ACC","BK4548":"巴美列捷福持仓","LU1244550221.USD":"FRANKLIN GLOBAL MULTI-ASSET  INCOME \"A\" (USDHEDGED) INC (M)","LU1059921491.USD":"NORDEA 1 GLOBAL STABLE EQUITY \"HB\" (USDHDG) ACC","IE00BZ1G4Q59.USD":"LEGG MASON CLEARBRIDGE US EQUITY SUSTAINABILITY LEADER \"A\"(USD) INC (A)","LU1720051108.HKD":"ALLIANZ GLOBAL ARTIFICIAL INTELLIGENCE \"AT\" (HKD) ACC","LU1430594728.SGD":"Eastspring Investments - Global Low Volatility Equity AS SGD","LU0308772762.SGD":"Blackrock Global Allocation A2 SGD-H","BK4503":"景林资产持仓","FCF":"第一联邦金融","IE00BD6J9T35.USD":"NEUBERGER BERMAN NEXT GENERATION MOBILITY \"A\" (USD) ACC","LU1720051017.SGD":"Allianz Global Artificial Intelligence AT Acc H2-SGD","BK4543":"AI","IE00BWXC8680.SGD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5\" (SGD) ACC","BK4560":"网络安全概念"},"source_url":"https://seekingalpha.com/article/4702826-fortinet-could-be-one-of-the-most-undervalued-cybersecurity-plays","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2450704782","content_text":"Cybersecurity market expected to double to $128.99 billion by 2030.Fortinet has potential for growth despite recent decline in stock price.FTNT operates high-margin business with strong profitability, undervalued compared to competitors.   MF3dThere are many different investment methodologies, from generating passive income to capital appreciation. Many investors missed the incredible run by NVIDIA Corporation (NVDA) and are looking for the next big idea outside of the Magnificent Seven. One of the areas I am focusing on is cybersecurity, as I believe the bull market in this sector is just getting started. The U.S. cybersecurity market is expected to grow to $128.99 billion by 2030, which is roughly double from its $59.96 billion value in 2022. The global cybersecurity market had an estimated value of $222.66 billion in 2023 and is forecasted to grow at a 12.3% compound annual growth rate through 2030. This would place the global cybersecurity market's annualized spend at $501.53 billion in 2030. The amount of capital companies and governments are expected to deploy as cyber threats become more complex is massive. While companies like CrowdStrike Holdings (CRWD) have been generating market-beating returns for investors over the past year, one particular cybersecurity company has been left out of the rally. Unlike how CRWD has appreciated by 168% over the past year, Fortinet (NASDAQ:FTNT) has declined by -17.79%. When I look at which Cybersecurity companies have the potential to outperform in the 2nd half of 2024 and into 2025, FTNT is at the top of my list. I think many investors are focusing on CRWD and Palo Alto Networks (PANW) as these are the two largest holdings in the Global X Cybersecurity ETF (BUG) without looking at where value can be unlocked. I have increased my position in FTNT and I am writing covered calls on the position to generate income along the way. I plan on adding to my position in FTNT over time, as I believe there is a tremendous amount of upside to be unlocked.   Seeking AlphaFollowing up on my previous article about Fortinet  At the beginning of 2024, I wrote an article about FTNT prior to becoming a shareholder (can be read here). At the time, shares were trading for $58.10 and climbed past $70 in March, only to retrace around the $60 level. During the year, shares of FTNT appreciated by 5.15% while the S&P 500 climbed by 17.32%. In that article, I had discussed why I was interested in FTNT and how they were positioned to gain market share in a growing sector. I am following up with a new article as their 2023 fiscal year is in the books, and there is more financial data on the company. I think FTNT is an undervalued gem with massive growth ahead of it. I have been increasing my position and think FTNT could shock investors that are focused on the bigger cybersecurity names that are grabbing all the headlines.   Seeking AlphaRisks to investing in Fortinet  While FTNT delivered strong Q1 2024 earnings, shares sold off after a billings miss in Q1 and weaker-than-expected billings guidance for Q2. The real risk to investing in FTNT is that competitors take market share away from FTNT. FTNT may not be as well-known as Cisco Systems (CSCO), PANW, or CRWD, which could present a problem when Chief Technology Officers look to add hardware or services to their IT infrastructure. While the sector is expected to double by 2030, FTNT is competing against extremely strong competitors. CSCO just acquired Splunk, and if customers gravitate to product offerings from other companies, then FTNT's projected growth rates could be in jeopardy, which could significantly impact my bull thesis. Why I believe Fortinet can compete with the largest cybersecurity companies in the market Cybersecurity isn't a sector where there is a winner-take-all-all outcome or even a duopoly scenario. There are many different segments of cybersecurity, including hardware, endpoint security, network security, cloud security, and system management. Some companies are known for their hardware, and others are known for their enterprise-level software solutions. Companies like CSCO have diversified their product mix to extend past hardware to include software and subscription offerings. FTNT is recognized as a leader in several areas and has a product mix that reaches both networking and security. FTNT continues to find itself favorably positioned in research reports from reputable analyst firms, including Gartner, IDS, and Forrester. FTNT has been named in 5 of Gartner's Magic Quadrant reports, where they were a leader in network firewalls, SD-Wan, and WLAN and a challenger in single-vendor SASE and Security Service Edge. FTNT also gained an honorable mention in Access Management and was considered a visionary in Enterprise LAN. If FTNT wasn't at the top of the food chain, they wouldn't be named in more than 100 research reports from the major analyst firms or scored such high marks in the Gartner Magic Quadrants.   Fortinet What gets me excited about FTNT is that they developed a single operation system called FortiOS that includes full networking and security combination to provide SD-Wan and firewall technologies with their secure web gateway. FTNT's unified SASE is built into FortiOS, which can be deployed on-prem or via the cloud to offer secure computing and better customer performance. When it comes to total billings, 24% was derived from unified SASE in Q1 for FTNT. On the Q1 earnings call, management explained that billings were down 6% because of the backlog contribution to billings in the previous year. FTNT is becoming a well-rounded cybersecurity company as unified SASE revenue increased YoY by 30% within their services, and software license revenue increased 20% YoY. FTNT announced a 7-figure deal as they locked in an 800-location hotel and restaurant chain for their SD-Wan products, and a large U.S. financial institution inked an 8-figure deal with FTNT to overhaul their data centers. FTNT is winning deals against its competitors, increasing its revenue, and scoring high on analyst reports. I think there is a lot to be excited about as FTNT is in a position to gain market share in an industry that is expected to grow at a double-digit annualized pace. When I look at FTNT's profitability and forward earnings, its stock looks significantly undervalued I cannot stress this enough: whenever you invest into a company, you are paying the current value of all the future cash flow they will produce. I want to pay the best price today for a company's future profitability. I am not sure how closely investors are looking at FTNT's financials compared to competitors like CRWD. FTNT has scaled a high-margin business without taking on excessive debt. They currently have $3.02 billion in liquidity on hand between cash and short-term investments, with another $36 million in long-term investments. FTNT only has $993 million in long-term debt on the books, with just $1.08 billion in total debt. FTNT has been utilizing its profitability to reward shareholders, and since the close of the 2019 fiscal year, FTNT has repurchased 98.7 million shares, which is 11.44% of the shares outstanding. I love investing in businesses that have big margins, are extremely profitable, and are expected to grow. Today, CRWD has a market cap of $94.83 billion compared to $46.67 billion for FTNT, but their financials are inferior, in my opinion. In the TTM, FTNT has generated $5.4 billion in revenue, which is $2.11 billion more than CRWD. FTNT has produced $4.16 billion in gross profit compared to $2.47 billion for CWRD, which places its gross profit margin 1.84% above CWRD's, at 77.13%. FTNT operates an extremely high-margin business as its gross profit margin is above 75%. When I look at profitability, FTNT generated $1.26 billion more in operating income than CRWD, and its operating margin was 23.80% compared to 0.74% for CRWD. FTNT generated $1.19 billion in net income, which was a profit margin of 22.23% compared to CWRD's 4% profit margin. The only metric that CRWD outpaced FTNT on that I looked at was its free cash flow (FCF) yield, as CWRD operated at a 33.03% margin compared to 31.37% for FTNT. It's hard not to get excited about FTNT as it's valued at less than half CWRD from a market cap perspective while its profitability and margins are much stronger.   Steven Fiorillo, Seeking AlphaFTNT generates billions in profitability and operates at a high margin, but if there isn't forward growth then many investors and the market won't give it a premium. When I look at the forward growth for FTNT compared to its peers and take their margins into consideration, it looks very undervalued. FTNT is trading at 34.71 times 2024 earnings, while CRWD trades at 97.18 times and PANW trades at 61.31 times. The market isn't giving FTNT anywhere near the same multiple as its peers. Looking out to 2026, FTNT is expected to grow its EPS by 32.39%, which is more than PANW, and is trading at 26.22 times 2026 earnings. On a forward basis, CRWD trades at 60.32 times, and PANW trades at 47.18 times 2026 earnings. While FTNT is only expected to grow its earnings by 7.84% YoY in 2024, it gets back to double-digit EPS growth in 2025 and is expected to grow at a double-digit pace for the foreseeable future. I think that FTNT is a steal at these levels and that their profitability and growth will be rewarded in the future.   Steven Fiorillo, Seeking Alpha  Seeking AlphaConclusion  I believe that FTNT is an undervalued gem in a sector that is expanding rapidly. FTNT is expected to grow its profitability, and since there is less debt than cash on the books, I expect that it will continue to reward shareholders through an extended share repurchase program. FTNT is trading at less than 30 times 2026 earnings, has more than 30% EPS growth over the next 2 years, and is operating a high-margin business with a gross profit margin exceeding 75% and a profit margin exceeding 20%. FTNT is in a position to grow its market share and possibly beat the future consensus EPS estimates as they are being named as a leader in more cybersecurity segments. I think that FTNT is a dark horse that can outshine its peers and provide a lot of upside potential for its shareholders.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":0,"commentSize":1,"repostSize":1,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2450704782"}