Data security specialist Fortinet (NASDAQ:FTNT) was one of the market's biggest losers on Wednesday. The stock plunged as far as 20% overnight, crushed by a bleak outlook for the fourth quarter.

The drop puts Fortinet shares some 30% below 52-week highs, and just 3% above year-ago prices. Is it time to panic yet?

Let's have a look at Fortinet's numbers. Sales jumped 17% year-over-year to $136 million. A surge in deferred revenue led to 24% higher order billings, reflecting a rise in long-term contracts for support services. Non-GAAP earnings rose a penny year-over-year to $0.14 per share, in line with analyst estimates.

All of this is what you'd expect from a healthy growth business, though the earnings growth may look a bit mild next to the stock's P/E ratio, which sits in the 50s even after this sudden share-price plunge. Then again, Fortinet is kind of used to that kind of premium valuation:

FTNT P/E Ratio TTM Chart

FTNT P/E Ratio TTM data by YCharts.

Wall Street's reactions to the report were mixed. Needham kept its buy rating on the stock but reduced price targets by 30%. Nomura slashed its targets by a less drastic 12.5% and also kept its buy rating. Wunderlich Securities swam against the stream, upgrading Fortinet to a buy with constant price targets -- a move triggered by the price drop more than anything else.

These analysts largely agree that Fortinet remains fundamentally sound, but also that the top-line growth prospects out there are slowing down. The company is running out of low-hanging fruit, and the current product pipeline isn't exactly full of ladders.

Fortinet's misfortunes were underscored by another disappointing report from sector rival Checkpoint Software (NASDAQ:CHKP) Wednesday morning, and the double serving of bad news brought down other IT security stocks as well. Sourcefire (UNKNOWN:UNKNOWN) plunged 13% -- right in line with Checkpoint's drop -- on no particular news of its own.

All that being said, it's not like data security is going out of style. Fortinet is a proven leader in high-performance network security tools, and sits on a $375 million pile of debt-free cash to boot. That's nearly double Sourcefire's trailing sales, to give you an idea of the cash reserve's relative size, and enough to buy an outright majority stake in Websense (NASDAQ: WBSN).

In other words, if the entire security market is taking a breather, Fortinet will come up aces on the other side. I'm quite comfortable with my bullish CAPScall on this stock.


Fool contributor Anders Bylund has no positions in the stocks mentioned above. The Motley Fool owns shares of Check Point Software Technologies. Motley Fool newsletter services recommend Check Point Software Technologies and Sourcefire. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.