TSP Weekly Tech Stock Update—Aug 12, 2023

5 Things To Know In Tech (FRSH, FTNT, CHKP, FROG & AMD) + Tech-Stock Prospector Portfolio Updates

5 Things To Know In Tech

1-Freshworks (FRSH, $22.48) stock has rallied 23% since the business software vendor reported strong Q2 results on August 1. Total revenue rose 19% to $145.1 million, 2.6% above the consensus estimate. Per-share earnings of seven cents topped the consensus by five cents. Free cash flow of $18.1 million nearly doubled from Q1. The number of customers with ARR above $5k rose 18% to 19,105. Net dollar retention ticked up to 108% from 107% in the previous quarter.

Freshworks’ latest 2023 revenue guidance range of $587 million to $595 million (growth of 18% to 19%) was revised upward from the prior outlook of $580 million to $592.5 million.

Following the Q2 report, both Canaccord and JMP Securities lifted their Freshworks price targets to $25. Canaccord upgraded the stock to ‘Buy,’ saying the recent go-to-market realignment around larger, higher-value customers seems to be working. We covered Freshworks’ go-to-market changes in the July 2023 PDF of Tech-Stock Prospector (TSP #257).

2-Fortinet (FTNT, $59.68) was upgraded to ‘Buy’ with a price target of $70 at Guggenheim. This follows the stock’s one-day slump of 25% in the prior week after the cybersecurity solutions provider missed the Q2 revenue estimate and offered below-consensus Q3 guidance. Blaming macro uncertainty, Fortinet CFO Keith Jensen said an “unusually large volume” of deals that had been expected to close in the June quarter were pushed out to future quarters. Guggenheim thinks the bad news is now at least partially priced in. The firm looks for growth to reaccelerate in 2024.

3—Check Point Software (CHKP, $130.79) is paying $490 million for privately held Perimeter 81, a provider of a secure access service edge (SASE) platform. The company offers a cloud-native service that’s managed from a unified console. With the increase in hybrid work and the ongoing shift of datacenters to the cloud, the SASE market is expected to reach more than $20 billion by 2026, according to Gartner. Founded in 2018, Perimeter 81 has 3,000+ customers. Check Point is getting a deal, as Perimeter 81 was valued at $1 billion back in June 2022. The transaction is expected to close in Q3.

4-Shares of JFrog (FROG, $26.55), a provider of a DevOps platform used by developers to build and distribute software securely and efficiently, fell every session this week, losing 10.3%. The stock in early August initially rallied to a high of $30.81 after the company reported Q2 revenue of $84.2 million (up 24% year over year), above the consensus of $83.0 million. Cloud revenue of $27.6 million (33% of total revenue) gained 44%. For 2023, JFrog’s revenue outlook of $343.5 million to $345.5 million (above the consensus of $343.4 million) was raised by $2 million at the low end compared to the previous guide.

5-After failing in early August to get back above the July high of $122.12, shares of Advanced Micro Devices (AMD, $107.57) on Friday hit an intraday low of $106.49, testing short-term support at the June low of $107.08. The stock this week fell 7.1% and closed below its 50-day moving average of $115.23.

—Paid subscribers will receive the September 2023 PDF of Tech-Stock Prospector (TSP #259) via email on Tuesday, September 12.

—Paid subscribers have access to the TSP Market Overview and TSP Portfolio Updates sections below.