Fortinet, Zscaler, Okta named top ideas at Baird

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By Sam Boughedda

Baird analysts named Fortinet (NASDAQ:FTNT), Zscaler (NASDAQ:ZS), and Okta (NASDAQ:OKTA) as the firm's best ideas in the security and infrastructure software sector in a note to clients on Thursday.

The analysts said in a note to clients that Fortinet, which it has assigned an Outperform rating, is well-positioned to capitalize on the ongoing transition to hybrid IT infrastructures.

"FTNT displays a rare combination of growth and GAAP profitability as it continues to execute against the huge cumulative cyber/networking market. FTNT's tech advantage is its well-integrated Fabric Security platform running on an internally developed operating system," they said.

The analysts maintained an Outperform rating on Zscaler, telling investors it "is extremely well-positioned to benefit from vendor consolidation due to its Zero Trust architecture."

"We believe Zscaler's platform provides a better architecture for Zero Trust, a consistent user experience, and better protection than other vendors, and more importantly, Zscaler reduces security footprint and costs for enterprises, so core drivers are both performance and cost savings, which is especially important in this environment. Zscaler's first-mover advantage, differentiated architecture and strong IP barriers, unrivaled global scale, and streamlined goto-market will keep it well ahead of the competition, which is virtually non-existent at the high end, and support the pricing power we believe," they continued.

Finally, Okta was kept at Outperform, with the analysts believing that the "umpteen problems (security incident, macro, and CIAM sales integration)" Okta has faced this year have resulted in a share price overreaction to the downside and produced an "excellent entry point for a premier cyber platform."

"While we do not downplay the magnitude of work that lies ahead for the company in the next few quarters, we underscore the combination of a superior product and enormous underserved market. Despite the positive move in the stock since our initiation, we still think that the riskreward profile for such a high-quality cybersecurity asset is very favorable given that our checks indicate that the sales integration challenges and both the security events are unlikely to hinder growth long term," the analysts explained.