UPDATE: Bank of America Downgrades Fortinet to Neutral in Preliminary Q1 Revenue/EPS

In a report published Thursday, Bank of America analyst Tal Liani downgraded the rating on Fortinet

from Buy to Neutral, and lowered the price target from $27.00 to $22.00. In the report, Liani noted, “After market close, Fortinet announced preliminary Q1 revenue and EPS of $134-136mn and $0.10, missing Street forecasts of $140mn/$0.12. The shortfall was due to 1) several large US carrier deals not closing as expected, 2) regional weakness in EMEA and LatAm and 3) inventory shortages from new product releases. We take a negative view on the aforementioned issues and downgrade Fortinet to Neutral as we believe these issues could persist for some time, despite the company's solid hardware and strong performance in US Enterprise and Asia. We lower our 2013/14 rev/EPS estimates to $589/683mn and $0.55/0.62 from $652/786mn and $0.62/0.73, respectively. Our new PO of $22, down from $27, is based on 18x 2014 P/FCF, down from 21x, reflecting our view that a premium valuation is no longer warranted.” Fortinet closed on Wednesday at $21.85.