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Why Shares of Carbon Black Tumbled Today

By Timothy Green – Updated Apr 25, 2019 at 10:33AM

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The CFO is out, and guidance came up way short of expectations.

What happened

Shares of cybersecurity company Carbon Black (CBLK) slumped on Thursday after investors were spooked by a weak outlook and news that the CFO was resigning. A couple of analyst downgrades added fuel to the fire, pushing the stock down 22.9% by 12 p.m. EST.

So what

Carbon Black reported fourth-quarter revenue of $56.9 million, up 27% year over year and about $1.2 million above the average analyst estimate. Recurring revenue grew by 32%, while cloud revenue more than doubled. The company ended the quarter with 5,025 total customers and 2,851 cloud customers, up 34% and 78% year over year, respectively.

A cloud.

Image source: Getty Images.

Non-GAAP (generally accepted accounting principles) earnings per share came in at a loss of $0.20, up from a loss of $1.04 in the prior-year period and $0.04 higher than analysts were expecting.

Along with the fourth-quarter report, Carbon Black announced that CFO Mark Sullivan will resign, effective March 11. He will remain with the company until June 30 while Stephen Webber, former CFO and COO of BackOffice Associates, takes the CFO job.

Check out the latest Carbon Black earnings call transcript.

Now what

If the CFO resignation wasn't enough to rattle investors, Carbon Black's guidance did the trick. The company expects first-quarter revenue between $56.5 million and $57.5 million, and full-year revenue between $240 million and $244 million. Both ranges are below analyst expectations of $58.77 million and $257.3 million, respectively.

In response to the weak guidance, analysts at Morgan Stanley lowered their price target on the stock by $1 to $15, citing disruption from the shift to the cloud. Analysts at JPMorgan Chase took more drastic action, cutting their price target in half to $15 and lowering their rating on the stock from "overweight" to "neutral."

Carbon Black's transition to a cloud-first company is having a negative impact on growth, but CEO Patrick Morley believes it's "essential to maximizing the long-term market opportunity for the company." Investors don't seem so sure.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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