Analyst Note| Mark Cash |
We are raising our fair value estimate for narrow-moat Fortinet to $200 from $185 after its second quarter easily topped our expectations for sales growth. Our estimations for future growth were raised while we still expect an already strong operating profile to gradually expand. We believe Fortinet is well positioned as security undergoes a change from relying on siloed, well-defined perimeters to a more holistic approach that covers various threat vectors. Fortinet should continue succeeding as it blurs the lines between security and networking while also benefiting from organizations consolidating their security spending toward its security fabric platform. While we are hard-pressed to find any negativity in the quarter or guidance, we are more cautious about the possibility of continued torrid growth over the long term and would wait for a pullback with shares trading around $270.