Fortinet (FTNT) stock was down about 3.5% in Tuesday’s pre-market trading as Morgan Stanley turned bearish on the cybersecurity company, downgrading its rating from Hold to Sell. Analyst Meta Marshall lowered FTNT’s stock price target from $78 to $67, saying “disappointment in core firewall refresh overwhelms the story in the near term.”
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It is worth noting that Fortinet stock plunged following its Q2 results despite beating earnings expectations, as the company’s third-quarter revenue guidance lagged the Street’s estimates, triggering concerns about future growth.
In particular, investors were concerned about Fortinet’s firewall refresh cycle, as the company indicated that it was 40% to 50% complete, suggesting that this growth driver is about to fade. Management had earlier highlighted a $400 million to $450 million refresh opportunity in firewall products.
Morgan Stanley Downgrades Fortinet Stock to Sell
Marshall contends that Wall Street’s growth estimates for Fortinet for the next year need to be reduced further, which could weigh on the stock. The 4-star analyst added that while she sees growth opportunities in secure access service edge (SASE) and SecOps offerings, the dismal core firewall refresh impacts the company’s growth story over the near term.
The analyst believes that the Street’s Fiscal 2026 and 2027 estimates would come under pressure when Fortinet’s firewall refresh does not play out as expected, triggering a selloff in the stock. She expects the Street to build in high single-digit growth estimates, down from double-digit growth expectations, which will pressure valuation back to high teens on an enterprise value/free cash flow (EV/FCF) basis.
While Marshall currently finds FTNT’s risk-reward profile unfavorable, she sees the possibility of returning to the stock, given the continued traction with U.S. sales expansion and the upsell of additional SASE/SecOps products in the past few quarters. For now, the analyst expects Fortinet to underperform relative to its peers.
Is FTNT a Good Stock to Buy?
Even prior to Morgan Stanley’s downgrade, the consensus rating on Fortinet was a Hold based on six Buys, 28 Holds, and one Sell recommendation. The average FTNT stock price target of $87.75 indicates 11.5% upside potential.
