Fortinet’s stock sent to the ‘penalty box,’ while Cloudflare appears to have exited it

Fortinet Inc.’s warning of “macro uncertainties” was weighing on the cybersecurity sector Friday, though at least one industry name managed to buck the trend.

Fortinet’s FTNT, +1.49% shares were on track for their worst one-day performance on record Friday, last down more than 22%, after the company reported that an “unusually large volume of deals” got pushed out of the latest quarter, while executives talked up macroeconomic challenges.

The commentary, which helped push Fortinet’s shares away from recent record highs, had ripple effects across the sector, as Palo Alto Networks Inc.’s shares PANW, +0.47% dropped 10% Friday, while the ETFMG Prime Cyber Security ETF HACK declined 1%. The S&P 500 SPX was up 0.6%.

JPMorgan analyst Brian Essex, who had an overweight rating on Fortinet shares but lowered his price target to $74 from $88, said the company’s report hit “the reset button” with a disappointing outlook and billings performance.

Fortinet’s results were seen as a downbeat signal for Palo Alto Networks.

“Although Fortinet has somewhat different end market exposure, they also view results as a negative read for Palo Alto Networks which reports in a few weeks, particularly with regard to product growth and contract duration,” Essex said. “We expect Fortinet will be in the penalty box and will remain under pressure following the disappointing results and lower near-term growth outlook.”

Stifel analyst Adam Borg, with a buy rating and $72 price target on Fortinet, said the earnings report offered “a negative read-through for the broader cyber group, especially on top of the confusing signal sent by Palo’s unusual Friday post-close earnings/analyst day on 8/18.”

Given the stock’s run-up on the year, “it’s not surprising to see the breather and they think Fortinet will remain in the [near-term] penalty box as investors debate if this is simply digestion or competition/shifting architectures,” Borg said. “We firmly believe Fortinet’s competitive positioning remains quite strong.”

Balancing out the negative, Cloudflare Inc. shares NET, +5.54% rallied as much as 15% Friday after the company reported slightly better-than-expected results and guidance, and Chief Executive Matthew Prince played up the company’s AI inferencing strengths.

Notably, Cloudflare had claimed a similar problem to Fortinet’s, that deals were taking longer to close, in its earnings report back in April.

UBS analyst Roger Boyd, who has a sell rating on Cloudflare’s stock, called the company’s report “decent,” and said it leads to “a mostly unchanged outlook.”

Boyd said that while a second-quarter stabilization “does mitigate some concerns” that the 2023 outlook was still too high, “we don’t think the AI inference narrative was entirely proven out.”

Guggenheim analyst John Di Fucci, who has a neutral rating on Cloudflare shares, said it “seems that Cloudflare was a crowded short” given the stock’s reaction to results. While suspecting new business may have declined, DiFucci said that second-quarter results were better than those for the company’s first quarter, compared with the Street consensus.

“We have always appreciated the vision and product execution of this company, which they believe is at least partially accounted for in the current stock price,” DiFucci said.

Fortinet Named a Leader in the 2023 Zero Trust Edge Solutions Report by Independent Research Firm

SUNNYVALE, Calif., Aug. 16, 2023 (GLOBE NEWSWIRE) --

John Maddison, Chief Marketing Officer and EVP, Product Strategy at Fortinet“We’re pleased that their zero-trust approach to securing the expanding edges of today’s networks is being recognized by Forrester. They believe that the critical convergence of networking and security must be everywhere and are proud to be one of the only vendors to lead in firewall, SD-WAN, and Zero Trust Edge reports. For us, this recognition validates their continuing commitment to developing one of the leading single-vendor SASE solutions on the market.”

News SummaryFortinet® (NASDAQ: FTNT), the global cybersecurity leader driving the convergence of networking and security, today announced that Fortinet has been named a Leader in The Forrester Wave™: Zero Trust Edge Solutions, Q3 2023 report. The 32-criterion evaluation identifies the most significant vendors and evaluates their zero-trust edge (ZTE) solutions. Fortinet tied for the highest score in the strategy category.

Secure Networking with ZTE, Also Known as SASEAlso known as secure access service edge (SASE), a ZTE architecture merges and delivers networking and security functions as a service using a combination of zero-trust network access (ZTNA), secure web gateways, and cloud security gateways.

The Fortinet FortiSASE platform converges cloud-delivered security, including secure web gateway, Universal ZTNA, next-generation dual-mode CASB, Firewall-as-a-Service, and Secure SD-WAN networking. Powered by a single operating system, FortiOS, FortiGuard AI-Powered Intrusion Prevention Security Services, and a unified FortiClient agent, FortiSASE helps Excellerate efficiency and delivers consistent security everywhere. By bringing together all of the components needed to converge networking and security, it protects the hybrid workforce with zero implicit trust and helps organizations reduce complexity and consolidate point products. In the report, Forrester points out that Fortinet “differentiated itself in the market by developing and integrating networking functions such as routing into its remote office firewalls, which eases the rollout of its ZTE solution with a unified management interface.”

The Forrester report also states, “Fortinet balances security and networking with eye-popping value.” The report goes on to state, “One of the most compelling aspects of the Fortinet value proposition is its cost. As with its firewalls, the Fortinet option is priced quite literally an order of magnitude lower than the vendor’s most expensive competitors.” FortiSASE can help organizations securely and seamlessly reduce complexity and maximize their return on investment.

How the Forrester Wave™ Results Are CalculatedThe Forrester Wave evaluation is an test of the top vendors in the market. For the report, Forrester conducts primary research to develop a list of vendors and narrows the list based on the inclusion criteria. Details of product and strategy are gathered through a questionnaire, demos, briefings, and customer reference surveys and interviews.

The evaluation criteria is based on:

Each of the vendors included in the test has:

Fortinet FortiSASEThe Fortinet SASE platform provides secure access and high-performance connectivity to users no matter where they are located. By converging networking and security, FortiSASE delivers enterprise-grade security and provides secure remote access to the web, cloud, and applications anywhere. The cloud-delivered solution helps organizations overcome security gaps and integrates with Fortinet FortiManager for visibility and centralized management across on-premises and remote users.

Additional Resources

About FortinetFortinet (NASDAQ: FTNT) is a driving force in the evolution of cybersecurity and the convergence of networking and security. Their mission is to secure people, devices, and data everywhere, and today they deliver cybersecurity everywhere you need it with the largest integrated portfolio of over 50 enterprise-grade products. Well over half a million customers trust Fortinet's solutions, which are among the most deployed, most patented, and most validated in the industry. The Fortinet Training Institute, one of the largest and broadest training programs in the industry, is dedicated to making cybersecurity training and new career opportunities available to everyone. FortiGuard Labs, Fortinet’s elite threat intelligence and research organization, develops and utilizes leading-edge machine learning and AI technologies to provide customers with timely and consistently top-rated protection and actionable threat intelligence. Learn more at https://www.fortinet.com, the Fortinet Blog, and FortiGuard Labs.

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