Fortinet Earnings: Wide-Moat Vendor Has Its Mojo Back as New Channels Continue to Show Strength

We are maintaining our $77 fair value estimate for wide-moat Fortinet after the firm closed out a strong fiscal second quarter with revenue and profitability ahead of our estimates. Within the quarter, we were also encouraged to see Fortinet’s continued success in selling its existing customers its new security products, including offerings in Secure Access Service Edge, or SASE, and security operations. We think Fortinet’s strategy of diversifying its security product portfolio beyond firewalls is sound. We see these new businesses as strengthening the firm’s economic moat around its security business, as multisolution customers are less likely to churn than those that just purchase Fortinet’s firewalls. Alongside higher switching costs, we also think that Fortinet’s investments in these newer, higher-growth areas of security will allow the firm to insulate its top line from the cyclical nature of the firewall market.