This cybersecurity stock (and Blue Harbinger Disciplined Growth Portfolio holding) released strong quarterly earnings results after the close on Tuesday (whereby it beat estimates and it raised forward guidance). The shares are up double digits as a result. In this quick note, we provide some color on its prospects going forward.
Unlike other cybersecurity stocks, Fortinet has delivered healthy bottom-line GAAP profits every year since its 2009 IPO. This is extremely important in the current market environment where interest rates have risen so quickly because Fortinet is not at the mercy of capital market financing to support its continued growth like so many other high-growth yet unprofitable cybersecurity stocks are.
Despite the price gains, the shares are still below all time highs due to the indiscriminate market sell off (especially for cyber security stocks). And considering the massive total addressable market for cybersecurity (its huge and growing), combined with Fortinet’s powerful margins and cash flows, we expect to continue holding these shares for years.
For perspective on the quarterly results, here is an excerpt from the earnings release:
Total revenue grew 32% in 2022 and year-over-year to $4.42 billion, and we generated GAAP net income of $857.3 million. This marks the 14th consecutive year that we have been GAAP profitable, including every year since our 2009 IPO. Cash flow from operations was $1.73 billion and free cash flow was a Fortinet record of $1.45 billion for the year,” said Ken Xie, Founder, Chairman and Chief Executive Officer. “Our market share gains are being driven by Fortinet's integrated and single platform approach to cybersecurity combined with FortiASIC technology, which lowers the management costs and the total cost of ownership for organizations. Given our cost-for-performance advantage, the convergence of security and networking, and the consolidation of products and vendors, we expect to continue our solid growth trajectory.”
Fortinet has a lot of long-term upside ahead. Long Fortinet.