Gabelli & Co.’s Hendi Susanto today reiterates a Buy rating on shares of security technology vendor Fortinet (FTNT), and says its his pick for 2017 among the group,
We favor Fortinet’s market leadership, growth profile, business model and valuation.”
The background is that the security market is facing slowing spending overall:
The overall network security market sees elongated sales cycles in 2017 and investors are cautious about potential slowdown and less urgency in cyber security spending, following exceptionally strong capital spending in 2015. Fortinet believes customers now employ a more strategical and broader approach on their security architecture design and implementation.
Among the strengths, he likes the company’s re-org of its sales team:
We expect Fortinet to realize the benefit of its sales organizational and realignment change gradually in 2017 instead of in late 2016. Fortinet can be an attractive acquisition candidate. Besides having market leadership and a strong product portfolio, Fortinet has a well-diversified portfolio of products and customers (entry level, mid-range, and high- end). Fortinet’s valuation is attractive and below historical M&A in the network security space. Fortinet shares trade at less than 3x EV/Revenue and 16x EV/EBITDA. We calculate a 2016 PMV of $59 per share.
Fortinet shares today are down 74 cents, or 2.4%, at $29.95.
