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.
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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. "Fortinetremains 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 merelyreiterated 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 evenmore 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 article Why Fortinet Inc. Stock Plunged Today originally appeared on Fool.com.
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