Please ensure Javascript is enabled for purposes of website accessibility

Why Fortinet, Inc. Shares Fell 13.3% Today

By Anders Bylund – Nov 2, 2018 at 5:12PM

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

The cloud security specialist didn't knock the cover off the ball hard enough to impress investors in the third quarter. The stock is still up 115% in 52 weeks.

What happened

Shares of data security expert Fortinet (FTNT) closed 13.3% lower on Friday, following the release of strong third-quarter results with a side of bullish guidance. Earlier in the day, Fortinet's stock dipped as much as 14.5% lower.

Those are facts, not typos.

Two young office workers express disbelief at something on a shared computer screen.

Image source: Getty Images.

So what

In the third quarter, Fortinet's top-line sales rose 21% year over year to land at $454 million. Analysts would have settled for $451 million. On the bottom line, earnings jumped 75% higher to $0.49 per share. The consensus here stopped at $0.42 per share.

Looking ahead, Fortinet's management set their fourth-quarter guidance targets just ahead of the current analyst views. Revenue should grow roughly 19% over the year-ago period, landing near $495 million. Earnings are expected to come in at $0.51 per share, a 60% year-over-year gain.

And yet, Fortinet's shares plunged 13% lower.

Now what

The key to this sharp drop on a report packed with good news lies in the rearview mirror. Even now, Fortinet shares have more than doubled in 52 weeks and gained 14% over the last three months. These are market-crushing returns, leading to price-to-earnings and price-to-cash-flow ratios in Wall Street's nosebleed section.

I don't know what it would have taken to support Fortinet's shares at, say, Thursday's prices. The actual results just weren't impressive enough to keep the good times rolling. That being said, security is a red-hot sector right now, and Fortinet is positioned for long-term success, particularly in the even hotter cloud security market.

Expect more volatility in the months and years ahead. This time, we got an unexpected drop.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool recommends Fortinet. 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

Fortinet Stock Quote

*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
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/06/2022.

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.