Why Infoblox (BLOX) is Being Decimated in Pre-Market Trading

NEW YORK (TheStreet) -- It's looking like a rough day for Infoblox (BLOX) as several analysts downgrade the network services provider after management cut 2014 guidance.

In pre-market trading, shares have taken off 42.7% to $18.98.

Sterne Agee downgraded the stock to "neutral" with a $20 price target, while Needham & Company cut it to "hold" from "buy."

At Wedbush Securities, shares were downgraded to "neutral" from "outperform" with a $25 price target. The investment firm said the company is seeing a material deceleration in growth and the timeline for a recovery is uncertain.

After the bell Monday, Infoblox warned that revenue for the full year ending July would miss initial guidance. Management forecasts sales of $250 million to $254 million, below guidance of $270 million to $276 million and Thomson Reuters consensus of $274.52 million.

Full-year net income of 30 cents to 34 cents a share is far lower than analyst expectations of 52 cents a share.

Must Read: Why Infoblox (BLOX) Cut 2014 Guidance

TheStreet Ratings team rates INFOBLOX INC as a Sell with a ratings score of D+. The team has this to say about their recommendation:

"We rate INFOBLOX INC (BLOX) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been unimpressive growth in net income over time."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Software industry. The net income has decreased by 6.7% when compared to the same quarter one year ago, dropping from -$2.39 million to -$2.55 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Software industry and the overall market, INFOBLOX INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for INFOBLOX INC is currently very high, coming in at 78.82%. Regardless of BLOX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BLOX's net profit margin of -4.01% significantly underperformed when compared to the industry average.
  • INFOBLOX INC reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, INFOBLOX INC continued to lose money by earning -$0.10 versus -$0.14 in the prior year. This year, the market expects an improvement in earnings ($0.52 versus -$0.10).
  • Compared to its closing price of one year ago, BLOX's share price has jumped by 75.05%, exceeding the performance of the broader market during that same time frame. Regarding the future course of this stock, we feel that the risks involved in investing in BLOX do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.

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