Fortinet, Inc. (FTNT): A Bull Case Theory

We came across a bullish thesis on Fortinet, Inc. on Value investing subreddit by Last-Cat-7894. In this article, we will summarize the bulls’ thesis on FTNT. Fortinet, Inc.'s share was trading at $75.30 as of August 7^th. FTNT’s trailing and forward P/E were 30.00 and 30.49 respectively according to Yahoo Finance.

Fortinet (FTNT) delivered a solid Q2, beating expectations on both revenue and EPS, with 14% revenue and 15% billings growth. However, higher R&D and sales spending tempered EPS growth. While the quarter’s numbers were healthy, the stock plunged 25% following the call, as management revealed the highly anticipated hardware refresh cycle—previously expected to drive accelerating growth—was already 40–50% complete, with only a modest follow-up cycle projected for 2027. Investors, expecting a major growth inflection, were caught off guard by the subdued outlook, leading to a “that’s it?” reaction.

The stock is now down ~37% from all-time highs. Despite the selloff, the underlying business remains best-in-class. Fortinet has been founder-led for over 25 years, with meaningful insider ownership (~14%), and holds a significant moat via high switching costs, scale, and brand trust. It continues to grow revenue and billings in the mid-teens, while boasting elite financial metrics—80% gross margins, 30% profit and free cash flow margins, and a $4B net cash position. Compared to peers, it is far more disciplined with stock-based compensation, limiting it to just 4–5% of revenue, and has steadily reduced share count since 2017.

Strategically, Fortinet is well-positioned in high-growth verticals like SecOps and SASE, both expanding at 20%+ CAGRs. At 30x earnings and 27x free cash flow, the valuation isn’t cheap on the surface, but the quality, long-term growth opportunity, and consistent operational execution make the current pullback appear overly punitive. For long-term investors, the setup presents a compelling entry point into a durable compounder.

Previously, we covered a bullish thesis on Fortinet, Inc. (FTNT) by Dan in January 2025, which highlighted its innovation, strong balance sheet, and AI-driven platform expansion. The company’s stock price has depreciated by approximately 24% since our coverage. This is because the hardware refresh cycle underwhelmed. Last-Cat-7894 shares a similar view but emphasizes the market’s overreaction as a buying opportunity.

Fortinet, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 62 hedge fund portfolios held FTNT at the end of the first quarter which was 61 in the previous quarter. While we acknowledge the potential of FTNT as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.