FTNT shares breakout following solid results and outlook, can it hold the gains?

Fortinet Inc. (NASDAQ: FTNT), a leading global cybersecurity company, has announced its financial results for the fourth quarter of 2023. The company reported strong revenue growth, a significant increase in billings, and robust profitability. Fortinet also issued optimistic guidance for the first quarter and fiscal year 2024.

The company's earnings per share (EPS) came in at $0.51, surpassing consensus of $0.43 by $0.08. Revenues increased by 10.3% year-over-year to reach $1.42 billion, slightly exceeding the consensus of $1.41 billion. 

In terms of revenue breakdown, service revenue for 2023 amounted to $3.38 billion, marking a 28.1% increase compared to $2.64 billion in the previous year. Product revenue for 2023 showed a more modest growth rate of 8.2%, climbing to $1.93 billion from $1.78 billion in 2022. 

Billings, a key measure of the company's performance, also demonstrated growth, reaching $1.86 billion for the quarter, which is an increase of 8.5% compared to the same period last year. 

Fortinet provided guidance for the first quarter of 2024, forecasting an EPS range of $0.37 to $0.39, which places it at the high end of the $0.37 Street expectations. The company expects revenues for the first quarter to fall in the range of $1.30 billion to $1.36 billion, slightly lower than the consensus of $1.37 billion. Billings are projected to be within a range of $1.39 billion to $1.45 billion. Non-GAAP gross margin forecasts stand at 76.5% to 77.5%, and the operating margin is anticipated to be 25.5% to 26.5%.

Looking ahead to the fiscal year 2024, Fortinet anticipates achieving a revenue range of $5.715 billion to $5.815 billion, with service revenue expected to fall between $3.920 billion and $3.970 billion. Further, billings are projected to reach $6.400 billion to $6.600 

Non-GAAP operating income rose to $454 million, yielding a non-GAAP operating margin of 32.0%. Non-GAAP net income amounted to $392.0 million, reflecting a substantial improvement compared to the same quarter the previous year. 

The company's cash flow from operations for the fourth quarter of 2023 came in at $191.7 million, a decline from $528.1 million in the same period last year. Similarly, free cash flow decreased to $164.8 million during this quarter, compared to $497.2 million in the fourth quarter of 2022.

The company's board of directors authorized a $500.0 million increase in the share repurchase amount. 

FTNT shares broke out of the $64-67 trading range it held heading into the report. The stock jumped on the news, rallying to $73 before finding resistance. The shares are sliding back and will likely test the gap up support area of $68-70. This will be a critical level to hold or else it may relinquish all of its post-earnings gains.

Overall, Fortinet's earnings report for the fourth quarter of 2023 exhibits strong performance and growth across several financial metrics. The company's steady revenue growth, positive billings, and solid operating margins position it well for future success. Investors will be closely monitoring the company's progress in meeting its projected targets for the first quarter of 2024 and the fiscal year.

$FTNT(FTNT)