Why Fortinet Shares Can Continue Rising
Fortinet (FTNT), the cybersecurity solutions company, has shot up more than 35% on the stock market this year, which is not surprising considering the impressive growth rate that the company has clocked in the past two quarters. In the first quarter of the year, Fortinet had delivered 26% revenue growth, and it went a step further in the second quarter by reporting 30% year-over-year growth in revenue.
Fortinet's impressive growth will continue
The reason behind Fortinet's growth can be attributed to the fact that the company is operating in a fast-growing market and it is witnessing growth across different geographies.
Going forward, Fortinet will be able to sustain the impressive rate of growth in its financial performance as it has increased the number of major deals closed against its key competitors. The company has added more than 8,000 customers to its already robust customer base of 200,000 clients, including several Fortune Global 100 companies.
The successful contracts being signed by Fortinet to grow its customer base highlight the company's continued commitment of increasing its year-over-year billings, while delivering improved shareholder returns. The company is able to gain impressive traction due to its well-distributed product sales including entry-level products usually sold to SMBs/branch offices, mid-range products sold to enterprises, and high-end advanced products sold to large enterprises and telcos/service providers.
As a result, the company is able to add customers across different end markets and lend diversification to its portfolio.
More positive moves
Recently, Fortinet successfully closed the acquisition of Meru Networks, which is a leading player in cybersecurity solutions. By strategically acquiring this company, Fortinet will be able to grow its enterprise growth focus and secure wireless growth in the future. In fact, the acquisition will positively impact Fortinet's production portfolio and improve its opportunity to address the $5 billion enterprise Wi-Fi market with intelligent and consolidated secure wireless solutions.
Moreover, Black Hat has decided to use Fortinet's solutions to help secure the complete event network surroundings for staff, participants and attendees at the 2015 U.S. Black Hat conference. This is a key showcase of the company's improving traction in the end market, and acts as an advertisement about the strength of its solutions.
Due to its impressive growth prospects, it is not surprising to see that analysts at Barclays have initiated coverage on the stock with an overweight rating with a target price of $50. This indicates 20% upside from current levels. Since Fortinet is anticipated to improve its bottom line performance at a compound annual growth rate of over 16% for the next five years, Barclays overweight rating does not look surprising.
Even though Fortinet shares have gained impressively so far this year, investors can expect more upside from the company due to the positive moves that it is making to grow the business. In addition, Fortinet has a strong balance sheet with a cash position of $873 million and no debt. This indicates that Fortinet is well-equipped to continue investing in both organic and inorganic growth in the future, making the company a good investment.