Fortinet stock price target lowered to $85 at Stifel on EOS refresh concerns

Investing.com - Stifel has lowered its price target on Fortinet (NASDAQ:FTNT) to $85.00 from $95.00 while maintaining a Hold rating, following the company’s second-quarter earnings report. According to InvestingPro data, the company maintains impressive gross profit margins of 81.29% and a robust return on assets of 20.8%.

Fortinet delivered second-quarter results that exceeded expectations, with billings growing 15.4% year-over-year and revenue increasing 13.6% year-over-year. Product revenue rose 12.6% compared to the same period last year, with margins and earnings per share surpassing both Stifel and consensus estimates. The company’s financial health score on InvestingPro is rated as "GREAT," with particularly strong profitability metrics.

For the full fiscal year 2025, Fortinet raised its billings guidance beyond the quarterly beat but reaffirmed its revenue guidance, adjusting service revenue downward while slightly increasing product revenue projections.

Stifel highlighted management’s disclosure that 40%-50% of the fiscal year 2026 end-of-support (EOS) firewall refresh opportunity has already been completed, with executives seemingly downplaying both this opportunity and the upcoming fiscal year 2027 EOS refresh cycle.

Fortinet shares fell approximately 17% in after-hours trading, which Stifel attributed to concerns about services softness, customer churn, and questions regarding the company’s sustainable growth rate, prompting the firm to remain "on the sidelines" regarding the stock. Despite trading at a P/E ratio of 39.44x, InvestingPro analysis suggests the stock is currently undervalued, with 12 additional ProTips available for subscribers.

In other recent news, Fortinet’s second-quarter financial performance has captured significant attention, with the company reporting billings and revenue that exceeded consensus expectations by 3% and 2%, respectively. Despite these positive figures, several analyst firms have adjusted their outlooks on the company. UBS lowered its price target for Fortinet to $90, maintaining a Neutral rating, while Evercore ISI reduced its target to $78, citing concerns about the company’s firewall refresh cycle. Jefferies also decreased its price target to $85, despite Fortinet’s billings growth of 15.4% year-over-year surpassing expectations. Morgan Stanley (NYSE:MS) downgraded Fortinet from Overweight to Equalweight and set a new price target of $78, due to a revised outlook on the firewall refresh cycle. Raymond (NSE:RYMD) James reiterated its Market Perform rating, acknowledging the strong billing performance but expressing caution regarding a potential "supercycle" in the market. These developments reflect a cautious sentiment among analysts despite Fortinet’s recent positive financial results.

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