Trump to appeal tariff ruling, warns of economic consequences
Investing.com - Morgan Stanley downgraded Fortinet (NASDAQ:FTNT) from Equalweight to Underweight on Tuesday, while lowering its price target to $67.00 from $78.00. The cybersecurity company, currently trading at a P/E ratio of 31x and maintaining impressive gross profit margins of 81%, has seen 33 analysts revise their earnings upwards for the upcoming period, according to InvestingPro data.
The downgrade reflects Morgan Stanley’s concern that fiscal year 2026 and 2027 estimates could face pressure if the expected firewall refresh cycle proves smaller than anticipated, potentially making the stock an underperformer. This comes as the company maintains a strong financial position, holding more cash than debt on its balance sheet and generating robust free cash flows.
Despite Fortinet’s continued success in attaching additional products to its installed base, Morgan Stanley believes the smaller-than-expected firewall refresh could necessitate downward revisions to future estimates, creating a headwind for the stock.
Morgan Stanley noted that while Fortinet shares have already declined 17% year-to-date, with an even larger drop since second-quarter earnings, the firm still views the risk-reward profile negatively in the near term, citing the company’s free cash flow multiple in the low-to-mid 20s for what could become a high-single-digit grower post-refresh.
The investment bank indicated it might reconsider its position once the potential downdraft in estimates is priced in, acknowledging Fortinet’s continued traction with U.S. sales expansion and upsell of additional SASE and SecOps products in recent quarters. For a deeper understanding of Fortinet’s valuation and growth prospects, InvestingPro subscribers can access a comprehensive Pro Research Report, featuring detailed analysis of the company’s financial health and market position among 1,400+ top stocks.
In other recent news, Fortinet reported second-quarter 2025 results that met revenue expectations and exceeded forecasts for earnings and billings. The company’s product performance was notably strong, driven by momentum in the large enterprise segment, although there was a slowdown in subscription revenue growth. Despite these mixed results, Cantor Fitzgerald maintained a Neutral rating on Fortinet, while lowering its price target to $87 due to a slowdown in services. Similarly, Freedom Broker adjusted its price target for Fortinet to $100 from $115 but kept a Buy rating, citing competitive pressures. Erste Group downgraded Fortinet from Buy to Hold, expressing concerns about the company’s operating margins and future growth prospects. Fortinet’s revenue for the current year is expected to be between $6.7 billion and $6.8 billion, with a slight downward revision in its service revenue forecast. In other developments, Tepper Sports & Entertainment has implemented Fortinet’s Unified SASE and Security Fabric solutions to enhance cybersecurity across its operations, including the Carolina Panthers and Charlotte FC.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.