Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Extreme Networks Stock Crashed Today

By Anders Bylund – May 1, 2019 at 11:55AM

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 network equipment maker's soaring stock was brought down to Earth by a miss-and-reduce earnings report.

What happened

Shares of Extreme Networks (EXTR 3.27%) fell as much as 21.3% Wednesday morning, following the high-speed network equipment maker's third-quarter earnings report. As of 11:20 a.m. EDT, the stock had recovered somewhat to a 14.8% drop.

So what

For the third quarter of fiscal 2019, Extreme Networks reported earnings of $0.08 per diluted share on sales of $251 million. The Street consensus had been calling for $0.10 in per-share earnings and revenue closer to $253 million. The company also issued fourth-quarter guidance significantly below the current analyst forecast for that period.

Red chart arrow pointing downward.

Image source: Getty Images.

Now what

In a prepared statement, CEO Ed Meyercord said that the soft sales reflected ordinary seasonal patterns after a strong second-quarter surge. Extreme is also kicking off a wide-ranging refresh, releasing new versions of three-quarters of its product portfolio over the next few quarters.

"Our outlook for Q4 reflects the weakening economic environment in EMEA, lengthening sales cycles in our wireless business reflecting the introduction of WiFi6, and a lower backlog entering Q4," Meyercord continued.

It's not surprising to see investors taking a hacksaw to Extreme Networks' stock today, given the massive run-up the shares had been enjoying in recent months. Shareholders are still looking at a 31% gain year to date and a 54% value increase over the last six months. Against that backdrop, even a modest miss can bring some serious short-term pain.

Anders Bylund 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.

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

Extreme Networks, Inc. Stock Quote
Extreme Networks, Inc.
$12.94 (3.27%) $0.41

*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 09/28/2022.

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.