Fortinet (FTNT) fell 6% on May 3 to close trading at $85.96. The stock has now declined 8% this month. Fortinet’s stock though has still returned 22% in 2019 despite the recent pullback. This drop in stock price means Fortinet stock is currently trading 57% above its 52-week low of $54.76 and 11% below its 52-week high of $96.96.
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Fortinet announced its first-quarter results last week and beat Wall Street’s earnings and sales figures as well as guidance for 2019. Fortinet reported sales of $472.6 million and adjusted EPS of $0.46. This was above Wall Street’s average estimates.
Analysts expected Fortinet to post revenue of $471.8 million and earnings of $0.39 in the first quarter. So why did the stock fall despite an earnings beat? Investment bank Citi (C) downgraded Fortinet stock to “sell” from “neutral.” Citi also lowered Fortinet’s 12-month price target from $84 to $78.
Citi believes weak product trends and Fortinet’s strategy will impact sales going forward. Fortinet though stated that it expects sales between $505 million and $515 million in the second quarter with EPS between $0.49 and $0.51. Analysts expect EPS of $0.49 and sales of $510.3 million in the second quarter.
Is Fortinet trading at an attractive valuation?
Fortinet is trading at a forward PE multiple of 40.32x. In comparison, the company’s earnings are estimated to rise by just 13% in 2019, which suggests that the stock is still overvalued.
Out of 30 analysts covering Fortinet, 21 recommend a “buy” and seven recommend a “hold.” There are two “sell” recommendations. The average 12-month price target for Fortinet is $89.15, indicating the stock is trading at a discount of 4% to average estimates.