We believe Fortinet will pleasantly surprise investors in the second quarter. We expect to see strong quarterly earnings that exceed market expectations. Strong demand for network security products and cloud solutions is having a positive effect on the company’s business. Fortinet records high demand in all regions of its presence. The company plans to publish its financial statements on August 6. We raise our target valuation for the company’s shares from $ 250 to $ 270.
Our main investment thesis is that Fortinet will remain the leader in the UTM / SMB market and will also be able to increase its market share in the large enterprise cyber security equipment market. We project the SD-WAN market to grow at an average rate of over 20% per year over the next 3-5 years. Fortinet is the only NGFW provider that integrates SD-WAN and NGFW functionality in one device. We believe that Fortinet’s strong product line is less confirmed by market volatility and growth risks in the share of cloud security.
Fortinet provides network security appliances and unified threat management (UTM) products to enterprises, service providers, SMBs, and government entities worldwide. The company’s unified product portfolio includes NGFW, WAN/LAN Edge (SD-WAN), Cloud Security (FortiCloud), Email Security (FortiMail), AI-Driven SecOps (i.e. Forti-SIEM/SOAR/EDR/XDR), and SASE/Zero Trust solutions (FortiSASE). Fortinet ranks number one in the number of security appliances shipped worldwide with over 500,000 customers, representing about 30% of global firewalls deployed. Fortinet is headquartered in Sunnyvale, CA, and owns a 200,000 sq. ft. manufacturing assembly and operations center in Union City, CA. Fortinet has been free cash flow positive since its debut on the Nasdaq in 2019, commanding top tier investment grade credit ratings. The company was founded in 2000 by its current Chairman and CEO Ken Xie and his brother Michael (current CTO).