Fortinet falls 16% as outlook drags down security stocks
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Security technology and software stocks hit the skids Thursday as much of the sector followed Fortinet (NASDAQ:FTNT) into the red after it gave a disappointing business outlook and mixed quarterly results.
Fortinet (FTNT) shares tumbled by more than 16% after the company said late Wednesday that it expects to report a third-quarter profit of $0.26 to $0.28 a share, on revenue in a range of $1.11B to $1.14B. Wall Street analysts had forecast Fortinet (FTNT) to earn $0.27 a share on revenue of $1.13B for its third quarter.
Chief Financial Officer Keith Jensen said on a conference call that the "biggest change" the company has seen since the start of the year is Russia's ongoing war against Ukraine, as Russia had accounted for about 1.5% of Fortinet's (FTNT) total revenue.
Jensen said that when Fortinet (FTNT) stopped recognizing revenue on existing contracts in Russia, and suspended its services in the country "at that time, we did not anticipate it would be a full year event, but we are now."
Along with its third-quarter outlook, Fortinet (FTNT) also reported second-quarter earnings of $0.24 a share, on $1.03B in sales. Analysts had forecast the company to earn $0.22 a share on revenue of just under $1.03B.
Fortinet's (FTNT) outlook, in particular, led to selling across the security software sector as trading progressed Thursday.
Among security companies, Palo Alto Networks (PANW) shares fell more than 6%, CrowdStrike Holdings (CRWD) gave up more than 5% and Cloudflare (NET) was off by more than 2%.
Datadog (DDOG) shares fell 3% as it gave solid second-quarterly results, but its third-quarter outlook didn't surpass analysts' expectations. Monness, Crespi, Hardi analyst Brian White also cut his rating on Datadog's (DDOG) shares to neutral from buy following the company's forecast.