Evercore ISI maintains Fortinet stock with $105 price target

On Thursday, Evercore ISI reiterated its In Line rating for Fortinet (NASDAQ:FTNT) shares, maintaining a $105.00 price target. The firm’s analysis followed a mixed first-quarter earnings report from the cybersecurity company, which saw a dip in services revenue but was buoyed by stronger product sales. According to InvestingPro data, Fortinet maintains impressive gross profit margins of 80.56% and has delivered a robust 78.97% return over the past year, highlighting its operational efficiency despite mixed quarterly results. The shortfall in services was attributed to two fewer days in the quarter, a slower start to some channel initiatives, and churn within the Lacework customer base, which is expected to be resolved by the end of the second quarter.

Despite the revenue miss for the second quarter by $8.5 million against consensus estimates, management at Fortinet expressed confidence in a stronger second half, driven by hardware upgrades and demand for next-generation products. The company’s revenue growth remains solid at 12.27% over the last twelve months, with InvestingPro analysis revealing 13 additional key insights about Fortinet’s growth trajectory and market position. They also reported no immediate impact from tariffs in the first quarter or thus far into the second quarter, and the product refresh cycle is on track, aligning with channel checks conducted earlier in the quarter.

Fortinet’s management has not observed any significant macroeconomic impacts to date, citing robust activity in April and a healthy demand pipeline. However, they have adopted a more cautious outlook for the second quarter, which has led some to wonder why the full-year guidance remains unchanged. Management contends that their projections are based on maintaining similar close rates throughout the year, as seen in the first quarter.

The recent retirement of Fortinet’s Chief Revenue Officer (CRO) and the shift to a new sales leadership team were also noted as factors affecting guidance. The new team is reportedly taking a more conservative approach, which has introduced a level of uncertainty in interpreting their forecasts compared to the previous CRO’s style. Management believes that adopting a confident stance is prudent, though this has resulted in a disconnect, leaving analysts with some unanswered questions regarding the company’s future performance. InvestingPro’s comprehensive analysis shows the company maintains a "GREAT" financial health score of 3.32, suggesting strong fundamentals despite the leadership transition. For deeper insights into Fortinet’s valuation and growth prospects, investors can access the detailed Pro Research Report, available exclusively to InvestingPro subscribers.

In other recent news, Fortinet Inc. reported its first-quarter earnings for 2025, surpassing analysts’ expectations with an earnings per share (EPS) of $0.58 compared to the forecast of $0.53. The company’s revenue aligned with expectations, reaching $1.54 billion, marking a 14% increase year-over-year. Fortinet’s product revenue grew by 12% to $459 million, while service revenue rose by 14% to $1.08 billion. Despite the positive earnings results, Fortinet’s stock saw a significant drop in aftermarket trading. The company also announced new AI capabilities and product launches, which could impact future revenue streams. Fortinet provided full-year revenue guidance between $6.65 billion and $6.85 billion, anticipating strong growth in the latter half of 2025. Additionally, Fortinet expects to maintain its market leadership in cybersecurity solutions. The company is also preparing for a firewall upgrade cycle, which is expected to drive further growth.

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