Why Gigamon Inc. Stock Tumbled Today

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What happened

Shares of networking specialist Gigamon Inc.(NYSE: GIMO) were getting crushed today after the company issued a disappointing preliminary earnings report. As of 11:09 a.m. EST, the stock was down 28.3%.

So what

The maker of networking devices and other internet-connectivity and monitoring products said fourth-quarter earnings would come in short of prior guidance. Management said adjusted earnings per share would come in between $0.35 and $0.37, compared with guidance of $0.36 to $0.38, while revenue would total just $84.5 million to $85 million, well below the $91 million to $93 million it had forecast.

CEO Paul Hooper said, "We are disappointed our fourth quarter revenue was below our prior guidance," explaining that product bookings were lower than expected and several significant customer accounts deferred purchasing decisions into 2017.

He added, "Our business remains fundamentally strong with our performance in 2016 demonstrating that we continue to capture market share with our leading technology, solutions and partnerships."

Now what

Hooper's synopsis leaves room for a comeback in 2017 if he's right that customers were simply delaying orders. Until a couple of months ago, Gigamon had been a strong performer since its 2013 IPO as shares had more than doubled, and even with today's setback, revenue is still set to grow by 25%. For a stock that now has a modest P/E of just 25, that seems like an encouraging sign.

I'd expect Gigamon to bounce back from today's sell-off, but if this trend continues into the next quarter, there could be trouble.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.