Time To Bet On Fresh Record Highs For This Cybersecurity Stock

FTNT options are attractively priced

Managing Editor
Aug 13, 2018 at 1:31 PM
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Not to be confused with video game craze Fortnite, Fortinet Inc (NASDAQ:FTNT) has climbed up the charts in 2018, and recently gapped higher following an upbeat earnings report earlier this month. Making it even more intriguing, data suggests that now might be an appealing time for a bullish play on the cybersecurity name.

At last check, FTNT was down 0.2% to trade at $75.16, but is fresh off a record high of $75.78 from Friday. Meanwhile, the equity's Schaeffer's Volatility Index (SVI) -- a measure of front-month, at-the-money implied volatility (ATM IV) -- currently stands at just 25%. This SVI arrives in the 12th percentile of its annual range, indicating that speculative players have priced in lower volatility expectations just 12% of the time in the past year.

This combination of a high stock price and low IV has had bullish implications for FTNT in the past, according to Schaeffer's Senior Quantitative Analyst Rocky White. Since 2008, there has been four occasions where FTNT has been trading within 2% of its annual high while at the same time its SVI was in the 20th annual percentile or lower. Following those signals, the security was up 5.72% one month later, on average, and was higher a month later three times.

Looking at the charts, Fortinet stock has more than doubled year-over-year. The shares pulled back in early May and late July, only to bounce off their 60-day moving average, a trendline of support in place since October. The equity has not posted a losing month since September. 

Daily Stock Chart FTNT

The red-hot stock could also benefit from a round of upgrades and/or price-target hikes. Of the 22 brokerages covering FTNT, 13 rate the share a tepid "hold." In addition, its average 12-month price target of $73.25 sits below the current perch. 

 

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