Fortinet Upgraded At Pacific Crest On Potential Benefit From Profitability Initiatives

"A shift in focus to increasing profitability, a unified platform solution coming of age at the right time, and a go-to-market strategy that accentuates the company's comparative advantage leave us increasingly confident on Fortinet's ability to benefit from market dynamics," analyst Rob Owens wrote in a note.

Further, Fortinet is improving its profitability profile with meaningful expense rationalization on product investments and sales force. Owens sees potential for further margin expansion due to this increased focus on operating efficiency.

The brokerage highlighted Fortinet's strategy of sticking to its mid-market approach and believes "the company's breadth of platform continues to resonate well with customers."

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"Given the highly competitive nature of the large enterprise market, we see a reduced focus on the enterprise as well-aligned with the economics of the model," Owens noted.

Although FortiGate offering still remains the key growth driver, the company's adjacent solutions are getting increased traction. Owens sees a meaningful cross-sell opportunity relative to a 280,000 customer base that remains underpenetrated.

For 2016, Owens expects EPS of $0.70 on revenue of $1.28 billion versus consensus estimate of $0.70/$1.278 billion. Further, the analyst projects EPS of $0.90 for 2017 on revenue of $1.525 billion, while consensus view calls for EPS of $0.87 and revenue of $1.52 billion.

Shares of Fortinet closed Monday's trading at $35.67. The $47 price target represents a potential upside of about 32 percent.

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