FTNT - Undeserved 12% ER dump?

Fortinet FTNT is a cybersecurity stock, one of the top winners of 2021.

They just posted a stellar Q3 earnings with guidance that is above consensus, but they dumped 12% after hours at time of writing.

  • Operating margins are at high of year at 28% versus typical ~25%
  • Revenue growth is in line with the usual ~30% YoY.
  • QoQ gross profit is an increase of a stunning ~90M versus typical ~40 to 50M

Guidance seems to be above consensus: Fortinet Tops Q3 EPS by 6c; Offers Guidance By Investing.com

Link to Q3 earnings: https://investor.fortinet.com/static-files/da142bc6-5549-4e7b-9a91-8762cebebeb4

Why is this down 12%? Does this deserve to be down 12%?

Maybe an opportunity for calls at open tomorrow.

Thoughts?

5 Likes

This is very interesting, thanks for the post. I’m overall net bullish on cybersecurity given the global landscape now and how “wars” are also fought online. Did they give any guidance on recurring rev for 2023? Are their solutions pointed towards a weaker industry? OR is this just SPY related?

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Not seeing anything about 2023 guidance on their Q3 ER. Just Q4 and FY 2022.

Guidance

For the fourth quarter of 2022, Fortinet currently expects:

  • Revenue in the range of $1.275 billion to $1.315 billion
  • Billings in the range of $1.665 billion to $1.720 billion
  • Non-GAAP gross margin in the range of 75.0% to 76.0%
  • Non-GAAP operating margin in the range of 30.0% to 31.0%
  • Diluted non-GAAP net income per share attributable to Fortinet, Inc. in the range of $0.38 to $0.40, assuming a non-GAAP effective tax rate of 17%. This assumes a diluted share count of 795 million to 805 million.

For the fiscal year 2022, Fortinet currently expects:

  • Revenue in the range of $4.410 billion to $4.450 billion
  • Service revenue in the range of $2.645 billion to $2.655 billion
  • Billings in the range of $5.540 billion to $5.595 billion
  • Non-GAAP gross margin in the range of 75.0% to 76.0%
  • Non-GAAP operating margin in the range of 26.0% to 27.0%
  • Diluted non-GAAP net income per share attributable to Fortinet, Inc. in the range of $1.13 to $1.15, assuming a non-GAAP effective tax rate of 17%. This assumes a diluted share count of 800 million to 810 million.
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Reading through the transcript of the call there has been a lot of questions on billings and seems the conclusion is that billings fall short

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While they maintained FTNT’s ‘outperform’ status, several outlets did give it PT drops to the $60-70 range. Even the low end of these are still 33% above where it’s sitting now, but the market has been punishing PT drops these days.

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hmm a 11/18 50c just filled for me at 0.55. Seems like someone slap sold at the bid because the spread is 0.60-0.70

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These calls now 0.70-0.80. Can scale

Fully out at 0.70

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