Here’s Why Extreme Networks, Inc. Stock Crashed in May

What happened

Shares of Extreme Networks (NASDAQ: EXTR) fell 19.5% in May 2018, according to data from S&P Global Market Intelligence. The maker of data center networking equipment delivered a weak third-quarter report and modest guidance on May 8. The stock crashed hard and hasn’t recovered yet.

So what

Extreme Networks’ third-quarter sales rose 76% year over year to $262 million, boosted by several strategic buyouts that closed in 2017. Adjusted earnings increased by 60%, stopping at $0.16 per share. Your average Wall Street analyst had been expecting earnings closer to $0.21 per share on sales near $268 million.

Image source: Getty Images.

Now what

The company also fell short of analysts’ revenue expectations in the second quarter, triggering the start of a painful series of share price plunges. The stock is now trading roughly where it was 52 weeks ago but 41% below January’s 52-week highs. Extreme Networks shareholders enjoyed a 52-week return of 180% leading up to that fateful Q2 report, but the stock is all out of momentum and verve at this point.

That being said, shares now trade at just nine times forward earnings estimates or 1.4 times trailing sales. The buyout-powered surge may have been overdone, but you could say the same thing about the negative market reaction to near-miss performances in Q2 and Q3. Opportunistic investors might want to nibble at this interesting play on the enterprise networking market.

10 stocks we like better than Extreme Networks
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now… and Extreme Networks wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of June 4, 2018

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.

You May Also Like

About the Author: Over 50 Finance