Wall Street has had an on-again, off-again relationship with high-growth stocks over the past several years. During bull markets, these companies have seen their share prices skyrocket on hopes of continued success. Yet with the bear market that came in 2022, many of these stocks have taken much larger hits than the overall market.
Given the macroeconomic pressures on the global economy right now, investors are scouring every financial report when it gets released. On Thursday, shareholders didn't like what they saw from semiconductor maker Qualcomm (QCOM 1.49%) and cybersecurity specialist Fortinet (FTNT -1.97%). Below, you'll learn about the details and what the future could hold for these two companies.
Qualcomm drops to a two-year low
Shares of Qualcomm were down more than 9% in trading Thursday morning. The stock dropped to its worst levels since mid-2020 as investors examined the semiconductor giant's fiscal fourth-quarter report for the period ending Sept. 25.
Qualcomm's latest financials set new records in some key areas. Revenue jumped 22% year over year to $11.4 billion, reaching an all-time high. The company reported record sales in the handset, automotive, and Internet of Things segments. And adjusted earnings came in at $3.13 per share, up 23% from year-ago levels. For the full 2022 fiscal year, Qualcomm posted records both for sales and earnings.
Yet investors didn't like its downbeat forecast for its 2023 fiscal year. Citing macroeconomic uncertainty, Qualcomm cut its guidance for handset volumes using 3G, 4G, and 5G technology. It now expects volume to fall by double-digit percentages, worse than the mid-single-digit percentage decline it had previously forecast.
More broadly, Qualcomm pointed to deteriorating demand and a freeing-up of previous supply constraints as changing the dynamic within the semiconductor industry. Inventory levels have moved sharply higher as a result, and the company believes that this will hit its fiscal first-quarter earnings by roughly $0.80 per share. Given the sensitivity investors have had lately to bottom-line disappointment, it wasn't surprising to see Qualcomm's stock fall sharply to start the day.
Fortinet falls
Shares of Fortinet were down even more sharply, falling almost 16% a half hour after the beginning of regular trading on Thursday morning. The cybersecurity services provider reported solid third-quarter results, but its forecast left shareholders wishing for a more positive outlook.
Fortinet's backward-looking numbers were solid. Revenue jumped 33% year over year to $1.15 billion, with product revenue contributing an even faster 39% growth rate. Total billings of $1.41 billion were also up 33% from where they were 12 months earlier. Adjusted net income climbed by a healthy 58% to $262.7 million, resulting in impressive earnings of $0.33 per share on an adjusted basis. Free cash flow also made significant gains.
Yet Fortinet's projections weren't as optimistic. The company sees fourth-quarter sales of between $1.275 billion and $1.315 billion, with billings somewhere between $1.665 billion and $1.72 billion. Adjusted earnings of $0.38 to $0.40 per share would be significantly higher sequentially, but with the implication of full-year earnings of between $1.13 and $1.15 per share, Fortinet shareholders had seemed to want greater stability even in the face of challenging macroeconomic conditions.
Investors haven't been very patient with Fortinet's stock lately, and the share price has reflected skepticism among long-term shareholders about the cybersecurity company's ability to take full advantage of its massive addressable market. With so much competition and the need to stay on the cutting edge of technological innovation, Fortinet can't afford to miss a step as it aims to maximize growth.
