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Why CyberArk Software Ltd. Tumbled 14% in February

By Timothy Green – Mar 9, 2016 at 10:00AM

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The cybersecurity company managed a solid fourth quarter, but its lackluster guidance for earnings, as well as weak results from other enterprise software companies, led to the stock's decline.

Image Source: CyberArk

What: Shares of IT security solutions provider CyberArk Software (CYBR -2.85%) slumped 14% in February, according to data provided by S&P Global Market Intelligence. While the company beat expectations when it reported its fourth-quarter results, mixed guidance sent shares tumbling.

So what: CyberArk reported its results on Feb. 11, beating analyst estimates for both revenue and earnings. Quarterly revenue came in at $51.5 million, up 42% year over year, and about $7.6 million higher than the average analyst estimate. Licensing revenue rose 35% to $33 million, while maintenance and professional services revenue jumped 55% to $18.4 million. Non-GAAP EPS of $0.39 was well above expectations, beating analyst estimates by $0.19.

Despite the better-than-expected results, shares of CyberArk fell following the company's earnings report thanks to guidance that partially missed expectations. The company expects first-quarter revenue in a range of $42.5 million to $43.5 million, representing year-over-year growth between 29% and 32%.

This range was a bit higher than the average analyst estimate, but earnings guidance fell short. CyberArk expects non-GAAP EPS between $0.15 and $0.16 during the first quarter, and between $0.83 and $0.86 for the full year, compared to analyst estimates of $0.17 and $0.91, respectively.

Now what: Part of CyberArk's decline in February was due to weak results from other enterprise software and security companies, including Tableau and LinkedIn. CyberArk's results were solid, and its guidance, while a bit short of expectations, was far from a disaster. The company is one of the few fast-growing cybersecurity companies that manage to consistently turn a profit, although the stock is still pricey based on both revenue or earnings. The drop in February may turn out to be an overreaction, but with CyberArk's guidance calling for flat non-GAAP EPS at best, investors are right to be a bit concerned.

Timothy Green has no position in any stocks mentioned. The Motley Fool owns shares of and recommends LinkedIn. The Motley Fool recommends CyberArk Software. 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.

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CyberArk Software Stock Quote
CyberArk Software
$136.18 (-2.85%) $-3.99

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