Security Sector Check Amid Fortinet's Q3 Warning


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Goldman Sachs sees network security companies' shares to come under pressure in the immediate term after Fortinet Inc

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(NASDAQ: FTNT) reduced its forecast for the third quarter. The companies included in the sector check were: Symantec Corporation (NASDAQ: SYMC), Proofpoint Inc (NASDAQ: PFPT),

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Palo Alto Networks Inc (NYSE: PANW) and Check Point Software Technologies Ltd. (NASDAQ: CHKP).

Analysts Gabriela Borges and Chelsea Jurman see the security sector having delivered mixed results for the September quarter after Fortinet reduced its billing forecast by 8 percent. The analysts think this was due to strengthening deal cycles despite challenges faced in North America.

However, the brokerage pointed out that Barracuda Networks Inc (NYSE: CUDA) delivered more stable fundamentals for the August quarter with the billings exceeding the Street estimates by 3 percent. This was attributed to solutions for public cloud and email security.

Therefore, Goldman listed the following three key factors for the security group:

  • The brokerage is negative on fundamentals of Check Point, pointing out Palo Alto's share gain and product revenue reset.
  • Companies operating with subscription models are seen as more resistant, like Proofpoint and Symantec.
  • There's been a weak macro and digestion period of customers after purchases in 2015.
  • The brokerage summed up in a note, "Based on the GS IT Survey, customers are also consolidating down the number of security vendors they use. This should benefit share gainers and platforms (PANW, FTNT, SYMC) long term, but is also driving longer sales cycles. While visibility is limited, we see the potential for improved spending in 2017 based on historical buying patterns/refresh cycles."

    The above stock's status at close of Wednesday:

    • Barracuda closed at $25.47, gaining $2.14, or 9.17 percent.
    • Check Point added $0.14, or 0.18 percent, to finish at $76.77.
    • Fortinet lost $3.43, or 10.06 percent, to finish at $20.66.
    • Palo Alto closed at $154.22 losing $1.26, or 0.81 percent.
    • Proofpoint closed at $69.52 shedding $1.50, or 2.11 percent.
    • Symantec ended at $24.012 losing $0.12, or 0.48 percent.

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Crypto Whales Are Loading Up — Are You?

New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.


Posted In: Analyst ColorNewsAnalyst RatingsMoversTechTrading IdeasChelsea JurmanCybersecurityGabriela BorgesGoldman Sachsnetwork security