Fortinet: Color on Quarter
- Needham raises CY14 to $0.48/$707 mln from $0.46/$690 mln and CY15 to $0.59/$803 mln from $0.57/$784 mln. States that Fortinet reported strong results, with revenue and EPS both coming in above consensus estimates. Guidance for JuneQ was roughly in-line, yet the formal outlook for CY14 remains "directional" and firm questions how much visibility FTNT has. Billings performance in MarQ of +26% y/y was well above guidance, and driven by strong product revenues; investors may focus on why the strong license performance in MarQ did not seem to drive strong deferred growth (dragging subscriptions along with appliances). Firm remains cautious given volatility of service provider vertical and management's reluctance to offer clear full-year guidance. Maintain Hold rating.
- FBR raises tgt to $28 from $27 (23x firm's FY15 FCF est) to reflect increased confidence in co's long-term growth story and more stabilized execution in the field. While it has been a roller coaster ride for Fortinet (and its investors) over the past year, it appears co is clearly on a smoother growth path for 2014 and beyond as a strong product cycle, better execution, and a robust pipeline are setting the stage for "the comeback kid of security software" to capitalize on a fertile security market. While some investors may be frustrated by co's ramped up investment trajectory, FBR views this as near-term pain for long-term gain in hopes of reaccelerating license growth on the heels of a larger sales force and channel presence.