Analyst Note
| Malik Ahmed Khan |We maintain our $68 fair value estimate for wide-moat Fortinet after the firm reported a strong start to fiscal 2023 with sales and margins exceeding our expectations. Near-term macro headwinds remain, with broad-based budget scrutiny and spending optimization. However, we believe entrenched cybersecurity vendors such as Fortinet are better prepared to weather the macro pressures as their solutions are often must-haves for their clients. We believe that Fortinet, as a platform vendor, also stands to benefit from increased consolidation as customers rein in sprawling IT toolkits and reduce their overall number of IT vendors. We believe the breadth of Fortinet’s solutions, coupled with secular tailwinds such as increased spend on cybersecurity and consolidation of vendors, will allow the firm to deliver shareholder value in the long run. While we are optimistic on Fortinet’s value proposition over the long term, we believe the company’s current valuation reflects this optimism and view Fortinet’s shares as trading in the 3-star range.