Fortinet is Monday's pick for IBD 50 Growth Stocks To Watch as the cybersecurity stock adds to its recent earnings rally. Shares climbed more than 1% Monday in heavier-than-average volume.
The company develops and sells security solutions including network and cloud firewalls, 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. It also uses generative artificial intelligence in its global threat protection systems.
Shares hold the No. 1 spot out of 33 stocks in the computer software-security group. The group ranks a weak No. 174 out of 197 IBD industry groups.
Fortinet Stock Adds To Earnings Gains
Fortinet stock started forming a new cup base on Feb. 7, following the cybersecurity company's fourth-quarter earnings and sales beat. The stock traded sideways before weakening and falling below its 50-day moving average in early April.
Shares plunged 9.7% on May 3, after Fortinet's mixed first-quarter earnings report helped undercut its 200-day moving average. The stock traded below the line and found resistance in the 61.50 to 62.50 range.
Fortinet stock jumped 25.3% in heavy volume on Aug. 7, following the company's second-quarter adjusted earnings and sales results that beat views. Shares reclaimed the 50- and 200-day lines on the giant leap.
The cybersecurity stock held the gain and is about 4% below the 73.91 cup base buy point. The entry is also Fortinet stock's 52-week high and a level of resistance.
Profits Grow But Pace Expected To Slow
Fortinet's second-quarter earnings growth accelerated to 50% from 16% and 26% in the prior two quarters. Sales growth also picked up in the second quarter, rising 11% following 10% and 7% gains in the previous two periods.
Further, its adjusted gross margin was a record high 35.1%. The company also gave third-quarter earnings and sales estimates that topped analyst forecasts.
FactSet third-quarter profit estimates call for a 25% increase before slowing to 2% and 14% growth the following two quarter, and then a 5% drop. Meanwhile, sales are expected to rise an average 12% over the next four quarters. Full-year 2024 earnings estimates show a 24% rise, which then tapers to 9% in 2025.
The company boasts 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.
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