On Monday, UBS reaffirmed its Neutral rating on Fortinet Inc. (NASDAQ:FTNT) with a steady stock price target of $69.00. The firm highlighted the strategic significance of Fortinet's recent acquisition of Lacework, a move expected to enhance its cloud security offerings and address a critical gap in its consolidation strategy.
According to UBS, the addition of Lacework, a comprehensive Cloud-native Application Protection Platform (CNAPP), will likely bolster Fortinet's modest market share in cloud security.
Lacework's integration into Fortinet's portfolio is seen as a direct response to the previously limited adoption of Fortinet's FortiCNP, launched roughly two years ago. Fortinet had been partnering with Wiz to tackle market demands; however, an in-house solution now positions it more competitively against peers like Palo Alto Networks (NASDAQ:PANW) and Check Point Software Technologies (NASDAQ:CHKP).
The acquisition brings a well-rounded CNAPP to Fortinet, including both agent-based and agentless solutions for various cloud workloads, Cloud Security Posture Management (CSPM), Infrastructure as Code (IaC) security, and Cloud Infrastructure Entitlement Management (CIEM). This move is expected to resonate well with customers, aligning with Lacework's success in the midmarket and efforts to expand into the enterprise sector.
UBS anticipates that further details regarding the acquisition's impact will be disclosed during Fortinet's second-quarter earnings call, which is likely to take place in early August. Remaining questions pertain to the potential dilutive effects of the acquisition on Fortinet's financials.
In other recent news, Fortinet, a cybersecurity solutions provider, announced the acquisition of Lacework, an AI-powered cloud security firm. The financial details of the transaction have not been disclosed. Truist Securities maintained a Buy rating on Fortinet following the acquisition, which is expected to enhance Fortinet's security offerings and advance its product development in the Secure Access Service Edge (SASE) market.
During the first-quarter 2024 earnings call, Fortinet reported that its SASE business made up 24% of the total billings, with a year-over-year increase of 40% in its SASE pipeline. The acquisition of Lacework is anticipated to further boost Fortinet's SASE platform.
Analyst firms such as Piper Sandler, BMO (TSX:BMO) Capital Markets, Truist Securities, Mizuho Securities, and UBS have adjusted their price targets for Fortinet following mixed first-quarter results. Despite a shortfall in billings and a lower forecast for the second quarter, Fortinet's SASE offering is gaining traction.
The company's management has reiterated the full-year billings guidance, indicating the potential for a recovery in billings during the second half of the year. These are the recent developments for Fortinet.
InvestingPro Insights
Fortinet's strategic moves, including the acquisition of Lacework, have been met with a cautious optimism reflected in UBS's steady price target. The company's proactive measures to strengthen its position in the cloud security market are underscored by real-time data and insights from InvestingPro. Fortinet's market capitalization stands robust at $45.71 billion, indicating investor confidence in its long-term growth potential. The company's impressive gross profit margin of 77.13% over the last twelve months as of Q1 2024, coupled with a revenue growth of 14.2%, suggests that Fortinet is effectively converting its top-line growth into substantial gross profit.
InvestingPro Tips highlight that Fortinet not only holds more cash than debt on its balance sheet, ensuring financial stability, but also that management has been aggressively buying back shares, a sign of confidence in the company's future performance.
Moreover, 26 analysts have revised their earnings upwards for the upcoming period, signaling positive expectations for Fortinet's financial outlook. Investors may find these metrics particularly compelling, as they offer a glimpse into the company's financial health and management's strategic approach to shareholder value.
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