- Cybersecurity firm Fortinet smashes earnings forecasts
- Full year guidance raised for earnings and revenue
- Fund bought nearly six million Fortinet shares since mid-2023
Terry Smith is one of the UK’s best-known and closely watched fund managers, and his Fundsmith Equity (B41YBW7) fund remains hugely popular. So, it’s worth noting what his big bets are doing, and one of them is set to soar when Wall Street reopens later today after shooting the lights out with quarterly earnings.
Cybersecurity firm Fortinet (FTNT:NASDAQ) looks set to jump almost 17%, according to pre-market data, after reporting second-quarter earnings that beat analyst expectations and raising guidance for the full year.
The stock is set to open at $64.70.
WHAT DID FORTINET REPORT
The $43 billion company (as of yesterday’s $55.81 close) reported adjusted EPS (earnings per share) of $0.57, significantly beating analyst consensus of $0.41, on $1.43 billion revenue, also ahead of estimates set at $1.4 billion. That was up 10.9% year-on-year.
Fortinet's strong performance was driven by robust growth in its service revenue, which jumped 19.8% year-on-year to $982.4 million. The company also achieved record GAAP and non-GAAP operating margins of 30.5% and 35.1% respectively.
‘In the second quarter, we successfully balanced growth and profitability as our non-GAAP operating margin increased 820 basis points year-over-year to a company record of 35.1%, while billings and revenue were at the high end of their respective guidance ranges’, said Ken Xie, Fortinet’s founder, chairman and chief executive.
But what really set the stock ablaze was full year 2024 (to 31 Dec) EPS guidance, which is now set at between $2.13 to $2.19, well above the consensus of $1.76. This is on expected revenues in the range of $5.8 billion and $5.9 billion, above analyst estimates of $5.79 billion.
CYBERSECURITY TOP PICK
Fortinet is Fundsmith Equity’s top pick in the cybersecurity space, with the popular fund snapping up 843,000 shares in the company in the first quarter of 2024. That added to around five million shares that were bought during the second half of 2023.
Data from Stockcircle shows Smith first started buying Fortinet back in 2020, building a stake of more than four million shares. Fundsmith Equity’s holding was top sliced at more than double the purchase prices during 2021 and 2022. That makes its loading up on the stock again, at prices between $58 and $68, based on Valuesider information, worth noting.
