29 Wall Street Analysts See 'Gain And Pain' For Fortinet

Fortinet Inc(NASDAQ: FTNT)'s margins will narrow in 2015 as the company seeks to fuel top-line growth with a beefed-up sales force, according to several analysts Thursday.

The company posted fourth-quarter revenue growth of 26 percent Wednesday, although profits fell 26 percent.

Fortinet shares were falling Thursday, off 6 percent recently at $29.38.

But Wall Street is generally positive on the company, with 20 of its 29 analysts at Buy or Overweight according to FactSet Research.

Nine maintain Hold ratings, including Morgan Stanley's Keith Weiss, who nonetheless sees accelerating growth ahead for the company.

"But they're paying for it" in margins poised for another year of decline, Weiss said.

The analyst maintained a Hold rating on Fortinet and said its shares "may have difficulty pushing beyond" his $33 target.

But FBR's Daniel H. Ives raised his price target nearly 3 percent to $36, and maintained an Outperform rating.

Ives noted that the company's margin narrowed by 350 basis points in 2014 and he expects a further contraction of 150 basis points in the current year.

But the company has proven its ability to balance growth and investment, according to Ives. "This balance will be the focal point for investors in the years ahead," Ives said.

Pronounced threats facing governments and corporations present a "land-grab cybersecurity opportunity" for Fortinet according to Ives, and "near-term pain for long-term gain should pay dividends."

Citi's Walter H. Pritchard left his Buy rating and $37 target intact following Fortinet's fourth-quarter report, and said higher revenue and a narrower margin result in no change to his estimates for the company's free cash flow.

Pointing to Fortinet's 35 percent growth in fourth-quarter billings, Nomura's Frederick Grieb raised his price target to $35, from $34, maintaining a Buy rating.