Last week saw the newest full-year earnings release from Fortinet, Inc. (NASDAQ:FTNT), an important milestone in the company’s journey to build a stronger business. The result was positive overall – although revenues of US$2.2b were in line with what analysts predicted, Fortinet surprised by delivering a statutory profit of US$1.87 per share, modestly greater than expected. Earnings are an important time for investors, as they can track a company’s performance, look at what top analysts are forecasting for next year, and see if there’s been a change in sentiment towards the company. We’ve gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the most recent consensus for Fortinet from 26 analysts is for revenues of US$2.54b in 2020, which is a meaningful 18% increase on its sales over the past 12 months. Statutory per share are forecast to be US$1.92, approximately in line with the last 12 months. Yet prior to the latest earnings, analysts had been forecasting revenues of US$2.48b and earnings per share (EPS) of US$1.84 in 2020. It looks like there’s been a modest increase in sentiment following the latest results, with analysts becoming a bit more optimistic in their predictions for both revenues and earnings.
It will come as no surprise to learn that analysts have increased their price target for Fortinet 11% to US$127 on the back of these upgrades. The consensus price target just an average of individual analyst targets, so – considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Fortinet, with the most bullish analyst valuing it at US$150 and the most bearish at US$82.00 per share. This shows there is still quite a bit of diversity in estimates, but analysts don’t appear to be totally split on the stock as though it might be a success or failure situation.
In addition, we can look to Fortinet’s past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. We can infer from the latest estimates that analysts are expecting a continuation of Fortinet’s historical trends, as next year’s forecast 18% revenue growth is roughly in line with 19% annual revenue growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 12% per year. So it’s pretty clear that Fortinet is forecast to grow substantially faster than its market.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around Fortinet’s earnings potential next year. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates – from multiple Fortinet analysts – going out to 2024, and you can see them free on our platform here.
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