Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of CyberArk Software Tumbled Today

By Timothy Green - Updated Jul 14, 2017 at 1:55PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A weak second quarter driven by delays in closing deals has investors worried.

What happened

Shares of cybersecurity company CyberArk Software (CYBR -2.77%) slumped on Friday following the release of preliminary second-quarter results. Both revenue and earnings are now expected to come in below previous guidance, with the shortfall driven by the company's failure to close certain deals on time. CyberArk stock was down 17% at 12:15 p.m. EDT.

So what

CyberArk now expects to report second-quarter revenue between $57.0 million and $57.5 million, below the company's previous guidance of $61.0 million to $62.0 million. GAAP (generally accepted accounting principles) operating income is expected to be between $0.7 million and $1.1 million, while non-GAAP operating income is expected between $8.5 million and $8.9 million. That's a major shortfall compared to previous non-GAAP operating income guidance, which called for a range of $10.9 million to $11.7 million.

The CyberArk logo

Image source: CyberArk.

CyberArk chairman and CEO Udi Mokady blamed delays in closing deals in the Europe, Middle East, and Africa (EMEA) markets for the disappointing results. The company is in the process of rectifying the situation, according to Mokady: "We are actively working to determine and implement the appropriate steps to improve execution, drive stronger results and enhance visibility into our EMEA performance."

Mokady pointed to some silver linings, saying that there "were a number of positive trends in the quarter." Revenue from both the Americas and Asia Pacific region grew, the company's pipeline of deals expanded, and market fundamentals for privileged-account security remained robust in all regions. Mokady sees the second quarter as a minor issue in the long run: "We believe that our significant greenfield opportunity, leadership position in the market, and strategy will deliver long term value to our shareholders."

Now what

CyberArk will report its full second-quarter results after the market closes on Aug. 8. The new revenue guidance range represents 14.5% year-over-year growth at the midpoint, a fairly dramatic slowdown compared to recent quarters. Revenue expanded by 25.8% during the first quarter and by 25.1% during the fourth quarter of last year.

With CyberArk stock trading for more than six times last year's sales and more than 50 times last year's earnings, sluggish growth won't cut it. The big question: Are there deeper problems beyond contract-signing delays? Investors should get some answers on Aug. 8.

Timothy Green has no position in any stocks mentioned. The Motley Fool recommends CyberArk Software. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

CyberArk Software Ltd. Stock Quote
CyberArk Software Ltd.
CYBR
$145.59 (-2.77%) $-4.15

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
390%
 
S&P 500 Returns
125%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/12/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.