Fortinet plunges as Q4 guidance range highlights economic uncertainty creeping: Wedbush
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Fortinet (NASDAQ:FTNT) shares plunged nearly 14% on Thursday after the cybersecurity software maker reported third-quarter results and issued an outlook for the fourth-quarter that was wider than usual, leaving Wedbush Securities to note that the some economic uncertainty is starting to "creep into sales cycles."
Analyst Dan Ives, who has an outperform rating, but cut the price target to $64 due to a lower multiple, noted that Fortinet (FTNT) is "held to a higher standard" by Wall Street due to its past history of "massive beats" and the conservative billings guidance is likely to spook investors.
"While the company delivered overall very good results in the quarter given this shaky backdrop, clearly management is seeing macro economic uncertainty creep into sales cycles and along with a very complex supply chain resulted in a wider guidance range with slightly weaker billings forecasted," Ives wrote in a note to clients. 
The analyst added that Fortinet (FTNT) is now seeing what he called "normalized buying habits" largely due to the weakening global economy. 
Several other cybersecurity stocks were also lower in premarket trading, including Palo Alto Networks (PANW), Zscaler (ZS) and Crowdstrike Holdings (CRWD), among others.
For the third-quarter, Fortinet (FTNT) earned an adjusted 33 cents per share on $1.15B, compared to estimates of 27 cents and $1.12B in revenue. Billings rose 32.6% year-over-year to $1.41B.
Looking to the fourth-quarter, Fortinet (FTNT) expects sales to be between $1.275B and $1.315B and billings between $1.665B and $1.72B. It also expects adjusted gross margins between 75% and 76%, along with adjusted earnings between 38 and 40 cents per share, above the estimates of 35 cents per share.
Despite the sharp downturn in the stock, Ives noted that Fortinet (FTNT) has a long-term opportunity in front of it and advised investors to buy the dip. 
"Taking a step back, we believe the the longer term ~25% billings growth, robust [free cash flow], and formidable business model makes this a very attractive stock at current levels and we would be buying on weakness," Ives penned.
Last month, Morgan Stanley said Fortinet (FTNT) was one of several software stocks that had earnings multiples that suggested significant risk was "priced in."