Why Infoblox Inc. Shares Crashed Today

Is Infoblox's drop meaningful or just another movement?

May 30, 2014 at 12:59PM

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 Infoblox (NYSE:BLOX) fell a jaw-dropping 41% early Friday after the automated network-control specialist released mixed fiscal third-quarter results and weak forward guidance, and announced the pending resignation of its CEO.

So what: Quarterly revenue increased 5% year over year to $61 million, which was at the low end of its guidance range for sales of $61 million to $62 million. That translated to a 26% decrease in adjusted net income to $3.8 million, or $0.07 per diluted share. Analysts, on average, were looking for lower adjusted earnings of $0.03 per share on higher sales of $61.65 million.

Worse yet, Infoblox expects current-quarter revenue of $60 million to $61 million, which should result in adjusted earnings per share of $0.00 to $0.02. Analysts had expected adjusted fiscal fourth-quarter earnings of $0.06 per share on sales of $66.6 million.

Infoblox is expected to turn in full fiscal-year revenue of $245 million to $246 million, with adjusted earnings per share of $0.30 to $0.32. Again, the midpoint of both ranges is well below analysts' model for fiscal 2014 sales of $252.6 million and earnings of $0.33 per share.

Finally, Infoblox said its president and CEO of nearly 10 years, Robert Thomas, has decided to leave the company. Thomas will remain in his current positions pending the appointment of a successor.

Now what: On Thomas' resignation, Infoblox board Chairman Michael Goguen stated, "While we would be pleased if he would continue as CEO, the board respects his desire to pursue other personal and professional goals."

Today's massive pullback might be an overreaction, but given its sluggish top-line growth and weak outlook, I still don't think shares of Infoblox look cheap at 36 times the next year's estimated earnings. Keeping in mind that those estimates are likely to creep lower as analysts dig through today's results, I have no intention of diving in on the drop.

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

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