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Fortinet's FTNT stock performance has garnered significant attention from investors, with shares surging 51.4% in the past year. The cybersecurity leader's recent partnership with the Pittsburgh Steelers as their "Proud Partner" for the 2024-2025 season exemplifies its growing enterprise presence, though investors should weigh both opportunities and valuation concerns.
1-Year Performance
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Strategic Partnerships and Enterprise Growth
The partnership with Steelers, spanning across Acrisure Stadium and training facilities, showcases Fortinet's comprehensive Security Fabric platform capabilities. The implementation includes FortiGate Next-Generation Firewalls, FortiSwitch Ethernet switches, and various security solutions protecting everything from corporate operations to public Internet access. This 15-year relationship adds to FTNT's growing portfolio of enterprise clients, including recent wins with the Vancouver Canucks, demonstrating strong customer retention and solution scalability.
Financial Performance and Market Metrics
FTNT’s third-quarter 2024 results showed robust performance with total revenues growing 13% to $1.508 billion. Service revenues, comprising 69% of total revenues, increased 19% to $1.034 billion, while product revenues returned to growth at 1.7%. The company achieved record gross margins of 83.2% and operating margins of 36.1%, reflecting strong operational efficiency. However, investors should note these premium metrics contribute to the elevated valuation multiples.
Competitive Landscape and Challenges
The cybersecurity market remains highly competitive, with Fortinet facing strong competition from established players like Palo Alto Networks PANW, Cisco Systems CSCO, Check Point Software Technologies CHKP, CrowdStrike and Zscaler. Each competitor brings unique strengths, making it crucial for Fortinet to maintain its technological edge. The company's position as the only vendor leveraging a single operating system across five secure networking Gartner Magic Quadrant solutions provides differentiation, though sustaining this advantage requires continuous innovation.
The forward 12-month price-to-sales ratio of 10.93 sits well above the Zacks Internet Software industry average of 3.01, suggesting high growth expectations but also increased risk.
FTNT’s P/S F12M Ratio Depicts Stretched Valuation
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Growth Catalysts and Innovation
Fortinet's commitment to innovation is evident in its expanded Security Operations portfolio, including the launch of Lacework FortiCNAPP and FortiDLP, representing a new $20 billion market opportunity. The company's AI-driven Security Operations business showed remarkable growth with 32% billings growth, accounting for 10.5% of total business. Unified SASE billings grew 14%, with security service edge billings growth of 220% and pipeline up 130%, indicating strong market momentum.