This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Fortinet Must Secure Market Share

NEW YORK ( TheStreet) -- With so much of our daily lives being so heavily reliant upon computer/smartphone connectivity, I believe there will always be demand for companies that protect the world's precious data against cyber criminals. While Fortinet (FTNT - Get Report) still enjoys a meaningful chunk in the enterprise network security market, the company has been unable to manufacture growth and establish any sort of momentum.

Consequently, shares of Fortinet, which is down more than 6% year-to-date, have grossly underperformed market leaders Check Point (CHKP), which is up 21%, and Cisco (CSCO - Get Report), up 18%. Although there is credible evidence to suggest that Fortinet's revenue struggles are more market-related than execution failures, investors are nonetheless feeling "insecure" about the company's direction -- and with good reason.

Three months ago, when Cisco announced its $2.7 billion deal for anti-hacking giant Sourcefire (FIRE), it was clear that Cisco, which had already been on an acquisition spree, was looking to leverage its strong enterprise presence in hardware with higher-margin security services.

By virtue of Cisco paying 12 times revenue for Sourcefire, which amounted to a 30% premium, there's no denying it was an expensive deal. But this did little to move Fortinet's stock, which the Street then rushed to proclaim as "cheap" relative to Sourcefire's deal. Some even suggested that IBM (IBM), among others, should buy Fortinet.

Fast-forward three months later, not only has there been no deal, but Fortinet's stock is actually trading below where it was prior to Cisco's announcement. On Wednesday, the company will report its third-quarter earnings results and management will try to sell the Street on Fortinet's plans not only to revive growth, but also on ways the company plans to fight off its own cyber threats known as the competition.

The Street will be looking for 11 cents in earnings per share on revenue of $151 million, which would represent close to 11% year-over-year revenue growth. While this would reflect a deceleration of growth from the 14% posted in the July quarter, it would be nonetheless encouraging if Fortinet was able to post double-digit growth in a market that is still struggling with corporate IT spending.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
CSCO $28.42 0.00%
FTNT $47.74 0.00%
AAPL $121.30 0.00%
FB $94.01 0.00%
GOOG $625.61 0.00%

Markets

Chart of I:DJI
DOW 17,689.86 -56.12 -0.32%
S&P 500 2,103.84 -4.79 -0.23%
NASDAQ 5,128.2810 -0.5040 -0.01%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs