Fortinet's stock experienced a notable increase after TD Cowen upgraded its rating from Hold to Buy, maintaining a $100 price target. Analyst Shaul Eyal emphasized stable fiscal year 2026 outlook based on recent checks, and highlighted artificial intelligence as a complement rather than a competitor to security software. Despite some concerns regarding channel softness and rising memory costs, the analyst sees strong prospects for Fortinet's key business segments, suggesting potential upside to current revenue and billings forecasts.
Key Points
- TD Cowen upgrades Fortinet from Hold to Buy with $100 price target, reflecting optimistic growth potential.
- Analyst emphasizes stable fiscal 2026 outlook supported by strong channel checks and ongoing customer spending.
- Artificial intelligence seen as augmenting rather than displacing security software demand, underpinning strength in Fortinet’s cybersecurity offerings.
Fortinet Inc. (NASDAQ: FTNT) witnessed a 6% gain in its stock price Friday morning, buoyed by an upgrade from TD Cowen analysts who raised their rating from Hold to Buy while retaining a $100 target price. This development follows assessments indicating a steady outlook as the company approaches its fiscal year 2026.
TD Cowen analyst Shaul Eyal referenced recent, robust channel checks that point toward stability ahead. Although the firm's current financial model remains unchanged, Eyal identified prospective upward revisions to Fortinet’s fourth quarter 2025 billings and revenue projections. At present, those estimates forecast year-on-year growth rates of 11.6% for billings and 13.3% for revenue.
The impetus for the upgrade lies in the possibility that the current 11.6% growth estimate for fiscal year 2026 billings could be increased, reflecting persistent spending patterns among Fortinet’s customers. A noteworthy insight from Eyal’s analysis is that artificial intelligence is enhancing rather than replacing security software demand, suggesting sustained customer investment in Fortinet’s cybersecurity offerings.
Investor concerns addressed within the upgrade note include softer-than-expected activity in certain sales channels during the fourth quarter and the impact of rising memory prices potentially pressuring Fortinet's application-specific integrated circuit (ASIC) sales and gross margins. Despite these challenges, Eyal’s internal checks point to the potential for better-than-anticipated revenue and billings performance driven by strengths in Fortinet’s secure networking products, unified Secure Access Service Edge (SASE) solutions, and security operations (SecOps) segments.
TD Cowen views the current stock price as an attractive entry point into what it considers a reliable "rule of 45+" growth performer. The firm’s $100 price target is calculated based on an enterprise value to fiscal 2027 revenue multiple of nine times, or roughly 27 times enterprise value to free cash flow projected for the same fiscal year.
Fortinet’s shares concluded the previous trading day at $77.62. Investors weighing the decision to buy stock now have access to automated evaluations, such as those from ProPicks AI, which assess companies on a vast array of financial metrics including fundamentals, momentum, and valuation to gauge risk versus reward. This AI-driven model has previously identified other high-performing stocks by applying unbiased data analysis, highlighting Fortinet’s position among potential opportunities or comparisons within the technology sector.
Risks
- Softness in fourth-quarter sales channels could indicate weaker near-term demand impacting revenue recognition.
- Rising memory prices may pressure Fortinet’s ASICs sales and compress gross margins, affecting profitability.
- Potential dependence on continued growth in secure networking, unified SASE, and SecOps segments introduces concentration risk if market conditions shift.