Why Fortinet Inc. Stock Plunged Today

Shares of rose 22.2% early Monday after announced an agreement to acquire the online marketing specialist.

What: Shares of Fortinet were down 21% as of 3:30 p.m. Friday after the network security appliance specialist released solid third-quarter results, but followed with underwhelming guidance.

So what: Quarterly revenue rose 35% year over year to $260.1 million, and translated to a 20.5% increase in adjusted net income to $24.1 million, or $0.14 per diluted share. Analysts, on average, were anticipating adjusted earnings of $0.12 per share on revenue of $258.8 million.

Fortinet also grew billings 41% year over year to $299.6 million -- its highest ever result since going public in late 2009.

"We are executing well and our investment strategy is working," added Fortinet's founder, chairman, and CEO Ken Xie. "Fortinet remains well-positioned to gain market share globally due to our strong competitive technology position and best-in-class end-to-end network security solutions portfolio, as well as the ongoing success of our land and expand strategy."

Now what: However, for the full-year 2015, Fortinet issued guidance for revenue of $1.006 billion to $1.011 billion (up slightly from its prior range $1 billion to $1.01 billion), and merely reiterated its outlook for 2015 earnings per share of $0.51 to $0.52.

Analysts, on average, were already anticipating 2015 revenue and earnings near the high end of both Fortinet's new guidance ranges. So with shares already trading at a premium of around 48 times next year's expected earnings, it makes sense the market is disappointed Fortinet didn't raise guidance even more given its third-quarter outperformance.

Of course, it also seems fair to say a 20%+ single-day drop might be a bit of an overreaction to an otherwise-solid report, especially given the chance Fortinet could be once again under-promising with the intention of over-delivering. With that in mind, Fortinet is still effectively executing on its long-term goals, and I don't think this report should give patient investors any reason to be concerned.

The next billion-dollar iSecret

The world's biggest tech company forgot to show you something at its recent event, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here .

The article Why Fortinet Inc. Stock Plunged Today originally appeared on

Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

Copyright © 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More