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Investing.com - UBS lowered its price target on Fortinet (NASDAQ:FTNT) to $90.00 from $105.00 on Thursday, while maintaining a Neutral rating on the cybersecurity company’s stock. According to InvestingPro analysis, the stock currently appears undervalued compared to its Fair Value, with the company maintaining a "GREAT" financial health score.
The price target reduction follows Fortinet’s second-quarter results, which showed billings and revenue exceeding consensus expectations by 3% and 2% respectively, along with 33% operating margin and 17% growth in service billings. The company maintains impressive gross profit margins of 81.3% and has achieved 14.5% revenue growth over the last twelve months. InvestingPro subscribers can access 13 additional key insights about Fortinet’s performance and outlook in the comprehensive Pro Research Report.
Despite these positive metrics, UBS noted that Fortinet cut its second-half services revenue guidance by $50 million and appeared to revise downward its assumptions for the 2026 End of Service Life refresh opportunity.
The second-quarter results indicate implied fourth-quarter guidance for 11% billings growth, which falls below the company’s 12% three-to-five-year compound annual growth rate outlook, and approximately 13% service revenue growth, down from 20% projected for calendar year 2024.
UBS continues to model 10% billings growth for Fortinet in calendar year 2026, but expects prior consensus estimates of 12% year-over-year growth will likely need to be reduced, while noting that at 21 times enterprise value to free cash flow, the shares appear reasonably valued for what now looks to be a low double-digit growth story.
In other recent news, Fortinet reported its second-quarter results, which showed billings growth of 15.4% year-over-year, surpassing consensus expectations of 11.8%. However, the company also revealed that 40%-50% of its anticipated firewall refresh cycle is complete, a significant revision from the previously stated 20% completion rate. This disclosure has led to several adjustments from analysts. Evercore ISI lowered its price target for Fortinet to $78, maintaining an "In Line" rating, while Jefferies reduced its target to $85, keeping a Hold rating. Morgan Stanley (NYSE:MS) downgraded Fortinet from Overweight to Equalweight, cutting its price target to $78, citing a "meaningful reset of expectations" for the firewall refresh cycle. Piper Sandler also downgraded Fortinet to Neutral, reducing its price target to $90 due to concerns about renewal processing. Meanwhile, Raymond (NSE:RYMD) James reiterated a Market Perform rating, noting that while billings exceeded expectations, there was a lack of enthusiasm for a potential "supercycle" bull case. These developments reflect a cautious outlook on Fortinet’s growth trajectory amidst the evolving business landscape.
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