January 3, 2013
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 Allot Communications (NASDAQ: ALLT ) dropped a lot today, down by as much as 26%, after an analyst downgraded the stock.
So what: Oppenheimer cut its rating on Allot from outperform to perform, expressing a belief that the business was slowing down and that a fourth quarter miss could be in store for investors. The company may be facing headwinds in Europe and order activity may have weakened based on the analyst's checks.
Now what: Allot's book-to-bill may fall below 1, and the analyst expects sales to come in at $28.6 million with net income of $5 million. The consensus estimate calls for a top line of over $31 million in sales and a bottom-line profit of $5.5 million. Losing over 25% of its value on one analyst opinion may seem a bit excessive, but big swings are par for the course when you're talking about a small cap company valued at just $440 million and trading at over 36 times earnings.
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