Forescout pummeled, Cisco falls amid weakening enterprise spending view
Shares of publicly-traded companies in the network security space are trading lower after Forescout Technologies (FSCT) announced preliminary results for its third quarter.
Forescout slashed its view on sales and profit for the quarter, as sales are seen getting pushed out to future quarters amid a weakening in the global macroeconomic environment.
Forescout now sees total Q3 revenue of $90.6M-$91.6M as compared to its prior view of $98.8M-$101.8M. Non-GAAP operating loss for Q3 is expected to be in the range of $1.6M-$1.4M, compared to the company’s prior guidance range for an operating profit of $2.6M-$3.6M.
Forescout CEO Michael DeCesare said, “Q3 results were impacted by extended approval cycles which pushed several deals out of the third quarter.
This was most pronounced in EMEA against the backdrop of a challenging macro-economic environment. These deals were not lost to competitors and we are working to get them over the finish line.” JPMorgan analyst Sterling Auty downgraded ForeScout to Neutral from Overweight after the company announcement.
Auty cut his price target for ForeScout shares to $35 from $54. He also called this the “first notable negative preannouncement” in the software sector and thinks investors will be watching carefully to see if there are further issues that will cause multiples in the space to contract further.
ENTERPRISE SPENDING DROUGHT
Adding to the negativity in the Enterprise space was a Cisco Systems (CSCO) downgrade from Goldman Sachs.
Goldman Sachs analyst Rod Hall downgraded Cisco Systems to Neutral from Buy with a price target of $48, down from $56.
Large enterprise spending will continue to weaken and telecom spending activity will remain depressed in the near term, Hall stated.
The analyst noted that Goldman’s Enterprise Activity Index deteriorated in September, while his latest reseller survey was also incrementally negative on enterprise spending trends. PRICE ACTION: Shares of Forescout are down over 35.5% to $25.26 while Cisco is down over 2%.
OTHER STOCKS TO WATCH
Other companies to watch in the enterprise and security space include A10 Networks (ATEN), Check Point (CHKP), CyberArk (CYBR), Cyren (CYRN), and Fortinet (FTNT).
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