Why Varonis Systems, Inc. Shares Sank Today

Is Varonis' drop meaningful? Or just another movement?

May 6, 2014 at 6:01PM

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 Varonis Systems (NASDAQ:VRNS) fell nearly 13% Tuesday, despite the company's stronger-than-expected first-quarter results.

So what: Quarterly revenue rose 39% year over year to $17.5 million, which translated to an adjusted net loss of $0.30 per share. Analysts, on average, were looking for an adjusted loss of $0.44 per share on sales of $16.18 million.

What's more, Varonis expects full-year revenue in the range of $96.5 million and $98.0 million, which should result in an adjusted loss per share of $0.63 to $0.57. By contrast, analysts were modeling a wider 2014 loss of $0.68 per share on sales of $95.26 million.

Now what: Still, Varonis doesn't exactly look cheap, trading around 9 times last year's sales, and the company arguably still has work to do in convincing investors of the viability of its market for organizing human-generated enterprise data -- think things like spreadsheets, word processing documents, text messages, and emails. In the end, I'm still not convinced I should dive in as a long-term investor, and I prefer instead to simply keep tabs on Varonis Systems' progress over the next couple of quarters.

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