In June 2013, Gigamon was an enterprise tech IPO darling. Today its stock is crashing. The stock is down over 70% since its 52-week high of $US41.81, and down about 32% today alone, trading at just over $US12.
The reason? The company just warned investors for the second time in a row that its quarterly revenue is going to come in way below its forcasts. It reports earnings on July 24 and now says revenue will land at $34.5 million – $US35 million, below previous guidance of $US38 million -$42 million.
Just over a year ago, the co-founders of Gigamon raked in millions. On the first day of trading, the stock popped 50% from its initial price of $US19. Co-founders Patrick Leong and Thomas Cheung cashed out of 260,000 and 200,000 shares respectively and their remaining shares were worth upwards $US50 million apeice.
The stock was doing so well that in October, the company sold another 5 million shares in a secondary offering priced at $US38.50.
But just before it announced its first quarter, it warned investors that it was going to whiff on revenue, coming in short of its previous guidance.
And the stock plunged. It had been above $US36 before earnings to about $US15 afterwards.
For its first quarter, revenue did grow, ($31.8 million, compared to $25.8 million)
but so did its losses, from -7 cents EPS to -26 cents EPS.
Gigamon makes equipment for monitoring corporate networks to track performance issues. Every corporation uses such tools and apparently some investors thought the company was a good target for an acquisition.
With this latest disappointing news, a whole bunch of analysts have downgraded the stock, Forbes Brian Solomon reports, with Merrill Lynch going so far as to downgrade from
from Neutral to Underperform with a price target of $US11.
If this story sounds familiar, it should. An enterprise security company, FireEye, also recently peaked and crashed when it had to lower its guidance after investors had gone wild for the stock.