Why Sourcefire Shares Plunged

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 network security company Sourcefire (Nasdaq: FIRE  ) sank 10% on Wednesday after its third-quarter guidance came in below Wall Street expectations.

So what: Sourcefire's second-quarter results managed to top estimates -- adjusted EPS of $0.16 versus the average analyst estimate of $0.14 -- but disappointing guidance for the current quarter is triggering concerns over slowing growth. Of course, the stock has been on fire over the past year, up roughly 100% from its 52-week lows, so a small earnings hiccup shouldn't come as too big of a surprise.

Now what: For the third quarter, management now sees adjusted EPS of $0.19-$0.20 on revenue of $54 million-$56 million, versus the Wall Street consensus of $0.22 and $55 million, respectively. "We will continue to invest in innovation and our go-to-market initiatives," Chief Technology Officer Marty Roesch reassured investors, "and we remain confident in our ability to drive significant levels of growth." Given the impressive growth that Wall Street still expects from Sourcefire over the next several years, today's plunge might be providing investors with an attractive opportunity.

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