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Shares of Barracuda Networks Stumble After Issuing Guidance

By Tyler Crowe - Updated Apr 20, 2017 at 9:48AM

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Wall Street wasn't a fan of Barracuda's less-than-optimistic earnings guidance.

What happened

Shares of network security specialist Barracuda Networks (NYSE: CUDA) are down 17% as of 12:30 p.m. EDT today. The impetus for the decline comes after yesterday's conference call that issued weaker-than-expected guidance.

Lock on motherboard

Image source: Getty Images.

So what

Barracuda's most recent earnings results weren't what you would call breaking news. Both revenue and earnings for the quarter and 2017 fiscal year were slightly better than expectations, but certainly not enough to justify a big stock price jump.

The move today is probably more tied to comments from management on its conference call after the market closed yesterday. On that call, CFO Dustin Driggs announced fiscal year 2018 revenue guidance of $370 million to $380 million, a modest uptick from this past year's result of $352 million. Also, Driggs guided for non-GAAP normalized earnings to be in the range of $0.73 to $0.79 per share, below the most recent result of $0.82 per share.

That decline is mostly a result of some investments the company plans to make in 2018 to support its cloud-based products and offerings as well as build out some international data centers. Building out its international presence will be key for the company's future as growth rates for its business outside North America are considerably higher.

Now what

The lower-than-expected guidance is one of those things that will hit a stock like Barracuda's awfully hard in the short term. After all, it is small-cap growth stock where Wall Street is obsessed with short-term growth targets. For someone looking at this company over the long term, the better question to ask is whether these investments in fiscal year 2018 will pay off. The demand is there, as evidenced by its revenue growth outside of North America, but the jury is still out as to whether those investments will lead to better revenue and earnings growth for the next several years.

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