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Here's Why Extreme Networks Stock Crashed Today

What happened

Shares of Extreme Networks (NASDAQ: EXTR) fell as much as 21.3% Wednesday morning, following the high-speed network equipment maker's third-quarter earnings report. As of 11:20 a.m. EDT, the stock had recovered somewhat to a 14.8% drop.

So what

For the third quarter of fiscal 2019, Extreme Networks reported earnings of $0.08 per diluted share on sales of $251 million. The Street consensus had been calling for $0.10 in per-share earnings and revenue closer to $253 million. The company also issued fourth-quarter guidance significantly below the current analyst forecast for that period.

Image source: Getty Images.

Now what

In a prepared statement, CEO Ed Meyercord said that the soft sales reflected ordinary seasonal patterns after a strong second-quarter surge. Extreme is also kicking off a wide-ranging refresh, releasing new versions of three-quarters of its product portfolio over the next few quarters.

"Our outlook for Q4 reflects the weakening economic environment in EMEA, lengthening sales cycles in our wireless business reflecting the introduction of WiFi6, and a lower backlog entering Q4," Meyercord continued.

It's not surprising to see investors taking a hacksaw to Extreme Networks' stock today, given the massive run-up the shares had been enjoying in recent months. Shareholders are still looking at a 31% gain year to date and a 54% value increase over the last six months. Against that backdrop, even a modest miss can bring some serious short-term pain.

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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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