Fortinet is Thursday's IBD 50 Growth Stocks To Watch pick as it extends its time in a buy zone. The cybersecurity company's per-share earnings doubled from 2021 to 2023 and are expected to jump again this year.
Fortinet develops and sells security solutions including network and cloud firewalls as well as endpoint security and intrusion detection systems. It covers a range of services including email security, web application security, identity access management and network security analytics.
The company also uses generative artificial intelligence in its global threat protection systems.
Shares hold the No. 1 spot out of 33 stocks in the security software group. The group ranks No. 148 out of 197 industry groups followed by Investor's Business Daily.
Fortinet Stock Still Ripe For The Picking
The cybersecurity stock has been in a buy zone for seven weeks.
Fortinet stock rocketed 25.3% higher in heavy volume on Aug. 7, following the company's second-quarter adjusted earnings and sales results that came in better than expected. Shares reclaimed their 50-day and 200-day moving averages on the giant leap.
The stock broke out of a cup base with a 73.91 buy point on Aug. 16 in lighter-than-average daily volume. Shares have traded sideways in the 5% buy zone up to 77.61 since the breakout. Look for the stock to form a bullish three-weeks-tight pattern. The cybersecurity stock reached a 52-week high Tuesday.
Its relative strength line has started trending downward from its recent high in early September and should be monitored.
Cybersecurity Firm's Profit Look To Grow 25%
Fortinet's second-quarter earnings growth accelerated to 50% from 16% and 26% in the prior two quarters. Sales growth also ramped up in the second quarter, rising 11% following gains of 10% and 7% in the previous two periods.
FactSet estimates call for third-quarter profits to rise 25% before slipping to 2% and 14% growth the following two quarters, and then a 4% drop. In addition, sales are expected to rise an average 12% over the next four quarters. Full-year 2024 earnings estimates show a 25% bump, easing to 9% growth in 2025.
Fortinet stock earns a best-possible 99 IBD Earnings Per Share Rating and a 6 out of a possible 99 Earnings Stability factor. A lower stability reading indicates steady earnings over the last three to five years.
Mutual funds have lightened their positions, with 2,600 funds owning shares in June, down from 2,648 in March. Fortinet stock's Accumulation/Distribution Rating of C indicates an equal amount of buying and selling.
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