FTNT Stock Split: Fortinet Inc Announces 5 for 1 Stock Split to Take Part in Split Fray

FTNT Stock Split: Fortinet Inc Announces 5 for 1 Stock Split to Take Part in Split Fray
FTNT Stock Split: Fortinet Inc announced its first split in the year 2011. The ratio for split declared was 2 for 1, hence each shareholder got one additional share for each share held.

Many companies have announced the stock split in 2022. The split may not have changed the value of the company, but has helped the companies to attract new investors and to remain in the headlines for the time being. Companies like Amazon and Alphabet Inc did 20 for 1, Shopify 10 for 1, and Tesla’s board-approved 3 for 1 stock split have caught a lot of attention from media and retail investors.

The four stocks mentioned above have performed modestly in the year 2022, with stocks of Amazon Inc down 16.26%, Alphabet Inc down by 17.44%, Tesla Inc down by 26.40%, and the worst performer of the pack is Shopify Inc which has tumbled 70.21% since the start of 2022 (as of this writing-11.08.2022). The year 2022 has been a tough year for stock market investors and companies alike. While investors are forced to pull out the investments from risker bets due to inflation-induced bear sentiments, companies either had to opt for forwarding split or reverse split to manage their positions and listing in the exchanges.

Another technology stock, Fortinet Inc, which offers cybersecurity and network solutions to various organizations like Alaska Air Group, U.S. Department of Defense and Walmart debuted on Nasdaq with the symbol FTNT in the year 2009 and has given a whooping 3088.76% return since then. This extraordinary performance had led the company to announce stock split twice in its trading journey.

In this article, we will talk about the stock splits of Fortinet Inc, the recent correction of 16% in a single day and why Fortinet stock is a buy despite dismal performance since stock split.

FTNT Stock Split: Two Splits Since 2009

Fortinet Inc announced first split in the year 2011. The ratio for split declared was 2 for 1, hence each shareholder got one additional share for each share held. The split effective date was 2nd June 2011. The share price was trading around $40, at the time of split date, and it reduced the share price by half and doubled the number of shares being traded. However, the split was not effective in terms of giving short term bullish push, for which it is widely known and is anticipated and the share price fell by about 20% with in a quarter by September 2011.

Fast forward the time to April 2022, where in Fortinet Inc disclosed about the next proposed stock split. The stock split was put up for approval in the annual shareholders’ meet on June 17th, 2022, and after approval, it got effective from June 23rd 2022. The ratio of stock split is 5 for 1, meaning each shareholder as on June 22, 2022 will get four additional shares for each share held. It reduced the share price in the same fraction, implying no effect on the market cap of the company, which remained intact at $42.49 Billion USD.

Although this time, split got the attention of retail investors, who poured in support and the share price moved higher. The share price at market closing hour on 22nd June 2022 was $55.69, which slightly increased to $56.80 by the closing of 23rd June 2022. Within a fortnight, the share price shot up by more than 15% to touch $62.70 on 8th July 2022. What is more interesting is that share volume almost quadrupled after the share split. While it averaged at 1 million pre- split, taken over a period of six months, it has gone up by more than 4 million almost on each day post-split. It even touched 8 million on 24th June 2022 and 20th August on 4th August 2022. So, it can be said that split has done its job this time. The split meant to buoy the sentiments has increased the retail participation in the stock. A stock split does not affect the share price in technical terms, but it does motivate the retail investors who are on the fence and hesitant in spending bigger amounts for buying a single share, can now own shares of that particular company in 1/5 price.

However, the share price after touching a peak of $62.88 on 3rd August 2022, fell more than 16% on the following day due to the announcement of second-quarter results after the bell on 3rd August. In the following section, we discuss the reasons for the spectacular fall.

FTNT Stock Split: Poor Guidance Led to 16% Fall in a Single Day

Fortinet Inc stock had one of the worst performances in last seven years when on 4th August share price fell by more than 16% in a single day. The fiscal quarter results announcement after the market hours on 3rd August were good and did beat the market estimates. The company reported non – GAAP earnings per share of $0.24 per share, which is significantly up from $0.19 in the same quarter last year and well above $0.22 Wall Street estimates. Also, the revenue of $1.03 billion saw an increase of 29% YoY and was above analysts’ estimates of $1.027 billion.

The real reason behind the fall can be poor third-quarter guidance from the management. The company reported third-quarter revenue guidance at $1.12 billion, which is slightly below the consensus estimate of $1.13 billion. Also, the cash flow from operations decreased 23% YoY to $323.4 million. Also, there is a significant decline at 28% in free cash flow of the company in Q2 to $283.5 million. All these factors led the share price fell below the pre-split level.

FTNT Stock Split: What Lies Ahead for Fortinet Inc After 5 for 1 Stock Split

The reaction to slightly disappointing guidance for third quarter is overdone for a start. It only points toward the fact that inflation-induced uncertainty is getting over investors’

sentiments towards a well-performing company. What is more important is the fact that Fortinet Inc is the second largest cybersecurity company after Palo Alto Networks.

Also, we can observe that the market for cybersecurity is increasing after the pandemic. Organizations looking for increasing efficiency are moving towards cloud computing and in turn increased software to keep the networks and machines safe. That is where the utility of Fortinet Inc as a company kicks in and the increased market participation in seen in terms of increased revenue at 31% in 2022.

The stock split for Fortinet has proved to be beneficial, as it pushed the share price by more than 15% in a fortnight. Moreover, the share volumes have been fantastic indicating towards more buying or selling is anticipated in the near future.

The ratio of split 5 for 1 can be argued to be way higher than the current market trend, but nevertheless Fortinet Inc stock is a quality stock with strong financials and the split does make it even more reachable to small retail investors.

SOS Reverse Split: SOS Limited Announces 1:50 Reverse Stock Split to Avoid Delisting

-Vineet Agarwal

Note: Crowdwisdom360 collates Predictions and data from all over the net and has no in-house view on the likely trends in the Stocks or Crypto Coins. Please consult a registered investment advisor to guide you on your financial decisions.

One thought on “FTNT Stock Split: Fortinet Inc Announces 5 for 1 Stock Split to Take Part in Split Fray

Comments are closed.