Palo Alto Networks (PANW) shares plunged over 20% in premarket trading on Wednesday after the cybersecurity firm issued a disappointing outlook for the rest of the year. The news sent shockwaves across the broader cybersecurity sector, with shares of other companies like Zscaler (ZS) and CrowdStrike (CRWD) also falling sharply.
Palo Alto reported better-than-expected fiscal second quarter financials, with revenue growth of 19% and earnings per share beating analyst estimates. However, the company warned that macroeconomic conditions are impacting deal cycles and deal sizes. As a result, Palo Alto lowered its full-year guidance for both revenue and billings.
The cybersecurity specialist now expects full-year billings between $10.1 billion and $10.2 billion, down from its previous outlook of $10.7 billion to $10.8 billion. It also reduced expected full-year revenue to a range of $7.95 billion to $8 billion, compared to prior guidance of $8.15 billion to $8.2 billion.
The disappointing outlook underscores weakness in the technology sector amid rising interest rates and fears of a potential recession. Many companies are tightening their cybersecurity budgets, leading to longer sales cycles for vendors like Palo Alto.
In a research note, Wedbush analyst Dan Ives called Palo Alto’s results a “major disappointment” that will have a ripple effect across cybersecurity names. Ives added that it could take a few quarters for confidence to return to the sector.
Alongside Palo Alto, shares of cybersecurity peer Zscaler plunged over 9% in premarket trading. CrowdStrike fell by a similar percentage. Other cybersecurity stocks like Rapid7 (RPD) and Tenable (TENB) were also trading sharply lower ahead of the opening bell.
Teladoc Plummets 20% After Disappointing Guidance, Restructuring Charges
In another sign of struggles among high-growth technology names, telehealth leader Teladoc Health (TDOC) plunged 20% in premarket action after providing disappointing guidance for 2024 and announcing restructuring charges.
Like Palo Alto, Teladoc delivered mixed fourth quarter results, beating Wall Street’s earnings expectations but falling just short on quarterly revenue. More concerning to investors was the company’s weak guidance for 2024 and expectations for restructuring charges in the first quarter.
Specifically, Teladoc said it expects Q1 pre-tax restructuring charges of approximately $11 million due to employee transitions and other expenses. Additionally, the company projected full-year 2024 revenue of just $2.635 billion to $2.735 billion, below consensus analyst expectations of $2.77 billion.
Teladoc also now expects only low- to mid-single-digit annual revenue growth over the next three years. That’s down from the company’s prior target of mid-teens annual growth.
After booming during the peak of lockdowns, demand for virtual healthcare services has moderated significantly over the past year. At the same time, Teladoc continues investing heavily in integrated care services, weighing on profitability. These dual headwinds have pushed the stock down over 80% from its highs.
In a note following Teladoc’s results, Credit Suisse analyst Jailendra Singh wrote that the disappointing guidance shows an “air pocket” in utilization trends and enterprise decision delays. With utilization and membership growth slowing, Singh believes it will likely take a few quarters for Teladoc to regain momentum.
SolarEdge Tumbles After Weak Guidance Points to Industry Headwinds
Shares of solar energy equipment provider SolarEdge Technologies (SEDG) plunged around 16% in Wednesday’s premarket session. The sell-off came after mixed fourth quarter results and a weak outlook that points to intensifying industry headwinds.
In the fourth quarter, SolarEdge generated record revenue of $890.7 million, up 59% year-over-year. However, bottom line results were impacted by elevated logistics and component costs. Gross margin contracted to 27.8% from 32.9%, leading to adjusted earnings per share of $1.65 versus expectations of $1.84.
More concerning than the mixed fourth quarter results was SolarEdge’s weak outlook amid industry-specific challenges. For the first quarter, the company expects another sequential decline in revenue, projecting sales between $175 million and $215 million. That’s massively below the $373 million consensus analyst estimate.
Gross margins are also set to compress further in Q1, with management guiding for a range between negative 3% and positive 1%. By comparison, SolarEdge generated gross margins above 30% in each of the last eight quarters.
The downward shift reflects an imbalance between supply and demand in the solar industry. While module supply is improving, uncertainty around electric vehicle tax credits in the U.S. has delayed utility-scale projects. With inventory piling up, equipment makers like SolarEdge are seeing margin pressure.
In Wednesday’s premarket trading, SolarEdge stock hit its lowest level since May 2020. Shares are now down 65% over the past year amid a challenging environment for the solar power industry.
