IBD Stock Analysis
- Shares surged out of cup-with-handle with a breakaway earnings gap
- New buy point as of Thursday now is 124.46, buy zone goes to 130.68
- Shares surged through new buy zone; Relative Strength Rating at 92 of 99
Industry Group Ranking
Cup with Handle
* Not real-time data. All data shown was captured at
1:51PM EDT on
Fortinet is the IBD Stock of the Day as the cybersecurity firm emerges as a fresh benefactor from the “work-from-home” economy. Amid the coronavirus emergency, Fortinet (FTNT) stock hit an all-time high on Thursday after reporting a solid first-quarter earnings beat.
The coronavirus lockdown has left many companies using virtual private networks as more employees work from home. VPNs enable employees to remotely access internal computer systems.
At the same time, companies need VPN-ready computer security gear. Fortinet’s “firewall” security network technology protects VPNs from hackers.
“Fortinet delivered a strong quarter, beating expectations on revenue, billings, and EPS,” William Blair analyst Jonathan Ho said in a report to clients. “Fortinet saw minimal impact from Covid-19 as increased work from home activity drove demand for its FortiGate, FortiClient, FortiToken, and FortiAuthenticator solutions.”
Gain In Firewall Security Market Helps Fortinet Stock
Firewalls block online intrusions and monitor web-based apps. Growth in the firewall market has slowed, mainly due to a corporate shift to cloud computing. But Sunnyvale, Calif.-based Fortinet has gained share versus Check Point Software Technologies (CHKP), Cisco Systems (CSCO) and others, analysts say.
Shares in Palo Alto Networks (PANW), also a firewall network provider, gained on Thursday.
Zoom Video Communications (ZM), ranked No. 21 in the IBD 50, has been a highly touted work-from-home stock. But investors overlook Fortinet, BMO Capital Markets analyst Keith Bachman said in a note to clients.
“The company has proven to be better suited to withstand Covid-19 disruption than previously expected,” Bachman said. “We think the company’s broad-based strength and resilience in SMB (small and medium-sized businesses) points to further impressive top-line growth.”
Fortinet earnings rose 30% to 60 cents while revenue jumped 22% to $576.9 million.
Similar to another recent IBD Stock of the Day — Latin American e-commerce firm MercadoLibre (MELI) — Fortinet stock on Thursday broke out of a cup-with-handle chart pattern with a buy point of 115.08. Fortinet stock surged to an all-time high of 135.86 in intraday trading, and in the process formed a breakaway earnings gap.
Fortinet Stock: SD-WAN Market A Bright Spot
The breakaway gap created a new buy point at 124.46. Its buy zone extends 5% to 130.68. Shares were extended, at 134.60 in afternoon trades, soaring by 20.8%.
Prior to the coronavirus emergency, Fortinet had targeted software-defined wide area networks, or SD-WANs, an emerging computer networking technology. Fortinet has developed security products that plug into SD-WAN cloud platforms.
With SD-WAN, companies have less need for costly private data networks leased from telecom companies. But along with the SD-WAN savings comes an increased security risk from data going over the public internet.
Boost From SD-WAN Products
SD-WAN products also gave Fortinet stock a boost in the first quarter, said Raymond James analyst Michael Turits in his report to clients.
“SD-WAN momentum continued as well, again a high single-digit percentage of billings this quarter,” Turits said.
Further, rival Palo Alto Networks is playing catch-up. It recently acquired SD-WAN startup CloudGenix for $420 million in cash.
In addition, Fortinet stock is part of the Computer-Software Security group. It’s ranked No. 17 out of 197 industry groups.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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