Predicting Fortinet's Stock Position in the Next Five Years
Predicting Fortinet's Stock Position in the Next Five Years
Fortinet (FTNT, up by 2.47%) holds a prominent position in the expanding cybersecurity sector. Due to some investors viewing it as a bargain following a decline from its yearly peak, the company is now regarded as a potential high-profit opportunity. If Fortinet's strengths in competitive edge and growth potential remain robust, significant returns could be expected over the next five years.
Extensive, Esteemed Offerings
Fortinet is a notable contender in the cybersecurity sector, boasting a wide range of products and services across three key segments:
- Secure networking: This involves firewalls, malware prevention, threat detection, software solutions, and network hardware like switches, routers, and security appliances. Secure networking is Fortinet's most established segment, accounting for nearly 70% of revenues and growing at a slower pace.
- Secure Access Service Edge (SASE): Making up approximately 25% of Fortinet's revenues, SASE segment is expanding rapidly. Last quarter, Forter reported a strong 24% year-over-year increase in service revenue, and expects a 18% compound annual sales growth over the next five years.
- Security operations (SecOps): This falls under outsourced security and IT staffing services, offering a more robust monitoring, threat detection, and tech management. While SecOps contributes less than 10% to Fortinet's total revenue, it exhibits high growth rates and complements the company's existing services.
Fortinet's offerings prove robust among competitors. Industry analysts rank Fortinet's core network security segment as a leader, with the company competing well against renowned companies like Cisco Systems, Juniper Networks, Hewlett Packard Enterprise, and Huawei. Statistics suggest that Fortinet has expanded its market share over the past two years, underscoring the strength of its product lineup.
Fortinet's SASE offering also garners positive reviews, though competitor challenges exist in its more rapidly growing service segments. Regardless, the potential rewards for growth cannot be ignored.
Reliable Market Drivers
Fortinet's diversified offerings position the company to capitalize on a prominent economic trend.
The surge in malware assaults and data breaches throughout the past two years indicates a problem that is expected to intensify in the coming decade as the volume of sensitive data escalates and cybercriminals find new targets.
AI can be weaponized to amplify these activities, further accelerating the trend. This tsunami of cybercrime is almost guaranteed to drive demand for cybersecurity solutions, and the sector is forecast to grow by 10% - 15% annually over the next decade. SASE is expected to grow even more swiftly at more than 25% annually.
If Fortinet can maintain or build upon its competitive position, the company stands to reap tremendous gains from these market forces.
Fortinet's Stock Outlook
Fortinet boasts compelling cash flow expansion possibilities, yet the translation of these prospects into shareholder rewards isn't guaranteed. It's critical to assess the company's valuation relative to its underlying financial metrics. Fortinet's valuation ratios reveal a bargain relative to most of Fortinet's cybersecurity compatriots. The firm's value is undervalued in relation to multiple indicators of future profitability.
This low valuation is due mainly to Fortinet's relatively modest 7% revenue growth, with an anticipated pickup later this year. Fortinet's product mix won't likely bring the same growth rates as competitors focused on software, like Palo Alto Networks, Zscaler, and CrowdStrike. Slow growth generally results in lower valuation ratios.
Fortinet may not reach the astronomical gains offered by faster-growing cybersecurity alternatives. However, the stock should exhibit less volatility thanks to its more moderate growth expectations and valuation. As with any investment, Fortinet's returns are influenced by external factors like recessions or bear markets.
Fortinet's product line, competitive position, industrywide growth catalysts, and reasonable valuation suggest that the stock has the potential to surpass the market's rate of return in the medium term.
Investors looking to capitalize on Fortinet's potential growth in the cybersecurity sector might consider investing some of their money in its stocks, given its strong financial performance and competitive edge. With the cybersecurity market projected to grow by 10-15% annually over the next decade, Fortinet's diverse offerings, such as SASE, which is expected to grow even more swiftly, provide attractive investment opportunities in finance.