Buying FTNT at a Discount? You Are Getting Paid to Do It
At about $79.41 a share, Fortinet (FTNT) is trading about 31% below its 52W high.
Do you think FTNT stock is a good long-term bet at current levels? What about at a 30% discount at about $55 per share? If you think that is a steal, and have some cash ready to go, here is a trade.
8.3% annualized yield at 30% margin of safety, by selling Put Options.
- Sell a long-dated Put option expiring 12/18/2026, with a strike price of $55
- Collect roughly $230 in premium per contract (each contract represents 100 shares)
- That’s about 4.3% annualized yield on the $5,500 you’re setting aside for the possibility of buying the stock
- This cash parked in a savings or money market account will earn an extra 4.0%, taking total yield to 8.3%
- And you give yourself a chance to buy FTNT stock at deep discounted price of $55
However, this is not the only stock strategy in town. Trefis High Quality Portfolio is a sophisticated framework designed to reduce stock-specific risk while giving upside exposure.
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Possible Trade Outcomes: You Win Either Way
| Stock Price Outcome | What It Means For You |
|---|---|
| FTNT stays above $55 | You keep the full $230 premium – 4.2% extra income over the next 352 days on cash that might otherwise earn you 4.0% or less. You never buy the stock and simply walk away with the cash. |
| FTNT closes below $55 | You’ll be obligated to buy 100 shares at $55. But thanks to $230 premium, your effective cost basis is just $52.7 per share – a roughly 34% from current level. |
But to hold this trade with conviction, you want to see long term upside in the stock. Because if it comes to it, you want to be excited about buying the stock cheap.
First, you want fundamentals to check out. For details, see Buy or Sell FTNT Stock or check Fortinet Investment Highlights
Second, you want to better understand competitive advantage and industry tailwinds. Below is what specifically gives us the conviction.
Why Hold FTNT Stock Long-Term
Fortinet’s wide economic moat is evidenced by its high switching costs, integrated security platform, and strong position within enterprise clients. The company is a leader in a market benefiting from powerful secular tailwinds, including the proliferation of cloud computing, AI, and IoT devices, which are expanding the cybersecurity attack surface. The projected double-digit industry CAGR provides a long runway for growth. A healthy balance sheet and consistent free cash flow generation make it a financially sound company we would be comfortable owning for the long term if assigned.
Competitive Advantage
We classify FTNT’s economic moat as WIDE, with the primary source being Switching Costs
- Fortinet’s integrated ‘Security Fabric’ platform, which has over 400 integrations, creates a significant ecosystem lock-in, making it complex and expensive for customers to switch.
- The company reported a Net Revenue Retention (NRR) rate of 112%, indicating existing customers are expanding their spending, a strong sign of satisfaction and low churn.
- Fortinet successfully implemented price increases to offset macroeconomic challenges, demonstrating pricing power without significant reported customer attrition.
- The company is ranked #1 in firewall shipments by unit and is used by 89% of Fortune 500 companies, indicating a strong, trusted market position.
Industry Tailwind
The industry tailwind is STRONG, with CAGR projection of 11.9% (Grand View Research)
Secular Trend: Digital Transformation (Cloud, AI, IoT)
Key Risks: Intense competition from other major cybersecurity firms and the rapid pace of technological change requiring constant innovation.
Financial Guardrails
Cash Generation: Positive Free Cash Flow
Balance Sheet: The company has a strong net cash position, with cash and short-term investments exceeding total debt, indicating a very low risk of bankruptcy.
Not comfortable with options or stock-specific trades? PORTFOLIOS are even better.
The Right Way To Invest Is Through Portfolios
Stocks can jump or crash but long term success comes from staying invested. The right portfolio helps you ride gains and cushion single stock drops
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.