Fortinet stock dives on macro warning. Palo Alto, CrowdStrike also drops.

A number of Fortinet’s peers fell in early trade, including Palo Alto Networks ( PANW ) , which was 8.2% lower, CrowdStrike ( CRWD ) down 4.7% and Zscaler ( ZS ), which fell 4.6%.

Chief Financial Officer Keith Jensen said an “unusually large volume of deals” the company expected to close in June were pushed out to future quarters instead. He said macro uncertainty affected Fortinet’s billing performance and an elevated level of late deals.

On top of that, Fortinet’s expectations for the third quarter also fell short of expectations. The company expects revenue of between $1.315 billion and $1.375 billion, lower than the $1.38 billion that analysts were expecting before earnings.

Wall Street wasn’t quite as downbeat as investors appeared to be on Friday. Wedbush analysts, led by Dan Ives, maintained an Outperform rating on the stock with a price target of $69. They said this quarter was a “bump in the road in the overall growth story” and that they believe Fortinet was well positioned to take advantage of tailwinds in the second half of 2023 and into 2024.

RBC Capital Markets analysts also said the results do not change the long-term outlook.

“Overall, the long-term opportunity remains intact, in our view, but with the stock up 56% year-to-date, shares are likely to decline following the results and as investors look to gauge billings progress through next year,” they said in a research note . They maintained a Sector Perform, equivalent to Neutral, rating on the stock with a price target of $68.

Guggenheim analysts also maintained a neutral rating, though without a price target, following Fortinet’s earnings. They said Fortinet’s competitive positioning is stronger and its opportunity greater than it was in the previous cycle. But they added that “one cannot help but question whether underlying demand will return near the medium term or whether this is the beginning of a slowdown due to increased competitive pressures and/or architectural shifts away from hardware form factors .”

The comment and outlook overshadowed the fact that adjusted second-quarter earnings of 38 cents per share beat expectations of 34 cents, according to FactSet data. Revenue of $1.29 billion narrowly beat estimates of $1.3 billion.

Write to Callum Keown at callum.keown@barrons.com