Why Fortinet Shares Got Walloped


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of computer-network security specialist Fortinet plummeted 18% today after its preliminary quarterly results disappointed Wall Street.

So what: One slow quarter isn't a huge deal, of course, but Fortinet's 35-plus P/E forces analysts to come down extra-hard on the stock. In fact, management blamed the warning on waning U.S. service provider demand, EMEA/Latin America weakness, and inventory shortages, giving investors plenty of concerns over slowing growth going forward.

Now what: Management now expects first-quarter EPS of $0.10 on revenue of $134 million-$136 million, clearly below the consensus of $0.12 and $140.4 million, respectively. "We remain optimistic about Fortinet's long-term opportunities as our products and innovation are strong and security demand drivers remain high," CEO Ken Xie reassured investors. Given the stock's still-lofty forward P/E of 25, however, I'd wait for even more of a pullback before buying into that bullishness.

Interested in more info Fortinet? Add it to your watchlist.

It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks?" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged by the five kings of tech. Click here to keep reading.

The article Why Fortinet Shares Got Walloped originally appeared on Fool.com.

Fool contributor Brian Pacampara 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 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.