Issue #62: a steady cybersecurity play and an AI “pick and shovel” business


Fortinet is a cybersecurity company that provides network security solutions to businesses and organizations. Their products include firewalls, VPNs, and intrusion prevention systems.

Arista Networks designs and sells multilayer network switches to deliver software-defined networking (SDN) solutions for large datacenter, cloud computing, high-performance computing and high-frequency trading environments.


Fortinet, Inc. ($FTNT)

Source: TradingView

???? Summary:

Share price at the time of writing: $64.27

  • Fortinet provides cybersecurity solutions, including network, application, cloud, and access security, as well as threat intelligence.
  • $FTNT serves a diverse range of industries, including financial services, healthcare, government, telecommunications, and education.
  • The Company has a global presence, with its headquarters in Sunnyvale, California, and offices in over 30 countries.
  • Revenues and earnings have shown steady growth in recent years, and valuation remains reasonable given the company's strong performance.

???? What they do:

Fortinet, Inc. offers a wide range of cybersecurity solutions, such as next-generation firewalls, secure SD-WAN, secure email gateways, web application firewalls, and endpoint protection. They also provide services such as threat intelligence, analytics, and managed security services.

These products and services are designed to protect organizations from advanced threats and help them maintain regulatory compliance.

$FTNT's flagship product, the FortiGate firewall, is a high-performance, integrated security appliance that provides a wide range of security features in a single platform.

Fortinet is committed to innovation, investing heavily in R&D to develop new products and stay ahead of the ever-evolving threat landscape.

Key product lines:

FortiGate: Next-generation firewalls that provide advanced security, high-performance, and deep visibility into network traffic

FortiMail: Secure email gateways that protect against email-based threats and data loss

FortiWeb: Web application firewalls that protect web applications from attacks and vulnerabilities

FortiClient: Endpoint protection solutions that secure devices and prevent data breaches

FortiSIEM: Security information and event management solutions that provide real-time visibility and threat detection

Fortinet has a strong global presence, with over 30 regional offices and more than 5,000 employees worldwide.

???? What we learned from social media and institutional investment patterns:

$FTNT is well-known in the cybersecurity industry, attracting attention from both individual and institutional investors.

Engagement on r/wallstreetbets is relatively low, as the company does not have the same level of hype as some other tech stocks.

There are occasional mentions on r/stocks and other discussion groups, but the overall engagement remains moderate. A viral surge in interest is not very likely.

Insiders hold around 17.8% of the shares, while institutions hold 71.9% of the float, which is 167.6 million shares. 1,082 institutions hold shares, with Vanguard and Blackrock being among the top holders.

Institutional investors appear to have a positive outlook on the stock.


The stock price has been on a steady uptrend in recent years, reflecting the company's strong performance and growing demand for cybersecurity solutions.

???? Smart Money Signal: Cathie Wood's ARK Invest holds 983,355 shares of $FTNT in their ARKW fund.

???? Why $FTNT could be valuable:

Fortinet operates in the high-growth cybersecurity market, which is expected to grow at a CAGR of 10.9% through 2028.

$FTNT offers a comprehensive suite of cybersecurity solutions, catering to the diverse needs of organizations across various industries. This positions the company well to capitalize on the increasing demand for robust cybersecurity measures.

Fortinet's commitment to innovation and R&D helps it stay ahead of the constantly evolving threat landscape, ensuring its products remain relevant and effective.

In addition, the company has a strong global presence, with offices in over 30 countries. This enables it to cater to the needs of customers worldwide, further expanding its market reach.

Fortinet's revenues have grown consistently over the past few years, reflecting the company's solid performance and growing customer base.

Source: Simply Wall Street

It's worth noting that Fortinet's customers include both large enterprises and small-to-medium businesses, providing the company with a diverse and stable revenue stream.

In recent quarters, Fortinet has continued to deliver strong revenue growth, with the most recent quarter showing a 26% YoY increase. This is a clear indication that the company is successfully expanding its market share.

Earnings growth has also been impressive, with the company consistently delivering strong results and beating analyst expectations.

*Analyst projection range, reported by

Operating margin stands at 18.53%, showcasing the company's ability to generate profits. Return on equity is a solid 34.67%. Fortinet has a healthy balance sheet, with more cash than debt.

$FTNT's valuation ratios, such as price-to-earnings (P/E) and price-to-sales (P/S), appear reasonable in comparison to industry peers, considering the company's strong performance and growth potential.

⚠️ What the risks are:

1️⃣ Competitive landscape: The cybersecurity market is highly competitive, with numerous well-established players vying for market share. Fortinet faces strong competition from companies such as Palo Alto Networks, Check Point Software, and Cisco Systems. Any loss of competitive advantage could impact the company's growth prospects.

2️⃣ Rapidly evolving threat landscape: The cybersecurity industry is characterized by rapidly evolving threats and the constant emergence of new vulnerabilities. Fortinet's success depends on its ability to anticipate and address these threats effectively. Failure to do so could negatively impact the company's reputation and market share.

3️⃣ Economic downturns: Economic downturns and reduced IT spending could negatively affect the demand for Fortinet's products and services, impacting its revenues and growth prospects.

Bottom line: $FTNT is a strong player in the high-growth cybersecurity market, with a diverse product portfolio and a solid track record of performance. However, investors should be aware of the risks associated with the competitive landscape and the rapidly evolving cybersecurity landscape. 

Arista Networks Inc. ($ANET)

Source: TradingView

???? Summary:

Share price at the time of writing: $163.00

  • Arista Networks specializes in software-driven cloud networking solutions for large data center, campus, and service provider environments.
  • $ANET's products cater to a variety of customers, including high-performance computing, financial services, content delivery, and cloud service providers.
  • Revenues and earnings have been consistently growing over the past few years, and the valuation remains reasonable considering the company's strong position in the networking solutions market.

???? What they do:

Arista Networks Inc. offers a wide range of high-performance data center switches and routers, network operating systems, network management software, and software-defined networking (SDN) controllers.

These products are available in various models and configurations, enabling customers to choose flexible solutions tailored to their specific needs.

$ANET's key product offerings include:

  • Arista Extensible Operating System (EOS), a network operating system that provides a single binary image across all platforms
  • CloudVision, a network-wide approach to workload orchestration and workflow automation
  • Universal Cloud Network (UCN), a suite of software-driven networking solutions designed for cloud environments
  • Arista Networks employs a significant number of people in R&D to ensure that they remain at the forefront of innovation in the networking solutions space.

$ANET also offers comprehensive support and services to its customers, ensuring that they can fully utilize the capabilities of Arista's products.

???? What we learned from social media and institutional investment patterns:

$ANET is a leading player in the cloud networking space, which generally garners some attention on social media. However, its focus on enterprise customers and lack of presence in the consumer market may limit its overall exposure.

Engagement on r/wallstreetbets is relatively low.

There are occasional mentions on r/stocks and other discussion groups, but posts are infrequent. Engagement has been generally moderate even during periods of significant stock price movement. A viral surge seems unlikely.

Insiders hold around 24.8% of the shares, a significant figure. Institutions hold 62.9% of the float, which is relatively large at 72.2 million shares. 724 institutions hold shares, with Blackrock and Vanguard each holding just over 8% of the float.

Institutional investors seem generally positive on the stock.


The large float and high level of institutional ownership mean that the stock is less likely to experience significant price swings due to retail investor activity.

???? Why $ANET could be valuable:

Arista Networks operates in high-growth markets, with the global data center networking market expected to grow at a CAGR of 11% through 2028. As more businesses move their operations to the cloud and require more efficient networking solutions, $ANET stands to benefit significantly.

$ANET provides some of the most innovative and efficient networking solutions available, catering to a diverse range of customers in industries where technology plays a crucial role in maintaining a competitive edge.

Arista Networks has a strong track record of innovation, with a consistent focus on R&D to ensure they remain at the forefront of the networking solutions market. This commitment to innovation has allowed them to develop a strong product portfolio that addresses the evolving needs of their customers.

$ANET revenues have been steadily growing over the past few years.

Source: Simply Wall Street

Arista Networks' customers are primarily large enterprises and service providers who require high-performance networking solutions. Their decision to purchase $ANET products is based on the performance and quality of the products, rather than advertising or celebrity endorsements.

Revenue growth in the most recent quarter was 27.5% compared to the same quarter last year. This is faster than the overall market growth, indicating that the company is gaining market share.

Operating margin is a healthy 32.7%. While return on equity stands at 30.2%. The Company has a solid balance sheet with more cash than debt.

$ANET's consistent revenue and earnings growth have allowed the company to maintain reasonable valuation ratios, despite a considerable increase in the stock's value over the last few years. The Company trades at 1.42 x trailing twelve-month sales and 32.6 x trailing earnings. The price/earnings growth (PEG) ratio is 1.87.

These valuations are moderate for a high-growth tech company, which may reflect investor confidence in the company's ability to continue delivering strong financial performance.

⚠️ What the risks are:

1️⃣ Competitive landscape. $ANET operates in a highly competitive market, with several well-established players such as Cisco, Juniper Networks, and Extreme Networks. The company needs to continuously innovate and deliver superior products to maintain its market position.

2️⃣ Dependence on a limited number of customers. Arista Networks derives a significant portion of its revenues from a limited number of large customers. Any loss of such customers or a decline in their spending could adversely impact the company's financial performance.

3️⃣ Supply chain disruptions. Like most tech companies, $ANET relies on a global supply chain to source components and manufacture its products. Geopolitical tensions, natural disasters, or other factors could disrupt this supply chain and negatively impact the company's operations.

Bottom line: $ANET is a solid growth play in the networking solutions market, with a strong product portfolio, consistent revenue and earnings growth, and a reasonable valuation. Investors should be mindful of the risks associated with competition, customer concentration, and supply chain disruptions.

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