Shares of Palo Alto Networks Inc. tumbled in extended trading Thursday after the maker of network security systems issued a revenue forecast short of analysts’ estimates.
Sales in the fiscal fourth quarter ending in July will be $106 million to $110 million, the Santa Clara, California-based company said on a conference call. Analysts on average were projecting revenue of $113.7 million, according to data compiled by Bloomberg.
Palo Alto also reported third-quarter sales that lagged analysts’ predictions, the first time the company has missed revenue estimates since selling shares to the public in July. The company blamed "challenging" economic conditions for a shortfall in Europe and among government clients. Daniel Cummins, an analyst at B. Riley & Co. in New York, estimates that the federal government accounts for as much as 10 percent of Palo Alto's revenue, while the European region comprises 20 percent to 25 percent.
"To come in at the low end of the guidance range is kind of a recipe for a one-day disaster for the stock," said Cummins, who recommends buying the shares. Still, "most of us would expect that this won’t be repeated," he said.
At 7:30 p.m. in New York, Palo Alto shares were down $8, or 15 percent, at $46.39, after dropping 0.7 percent to $54.39 at the close in New York. Prior to the report, the shares had climbed 30 percent since the company's initial public offering.
Palo Alto, co-founded in 2005 by former Check Point Software Technologies Ltd. executive Nir Zuk, is going head-to-head in the network-security market with Check Point, Cisco Systems Inc. and Juniper Networks Inc. Palo Alto's revenue is rising faster than rivals as businesses seek to protect themselves from sophisticated hacking attacks that older security technologies have struggled to stop.
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