Why Qualys (QLYS) Stock Is Nosediving

Jabin Bastian /
2024/02/05 1:30 pm EST

What Happened:

Shares of cloud security and compliance software provider Qualys (NASDAQ:QLYS) fell 11% in the morning session after reports that Microsoft (NASDAQ:MSFT) will be replacing a cybersecurity solution provided by Qualys with its own. Wall Street analyst Hamza Fodderwala added, "Microsoft has also been cited as a large customer for Qualys over the years, and though the announcement does not indicate a termination of their relationship with Qualys as a customer, we see risk of Microsoft having its own [vulnerability management] solution leading to a potential downsizing or replacement of its existing Qualys deployment." With Microsoft being one of the largest tech companies in the world, the prospect of losing such a big customer could significantly impact Qualys's business, including revenue, especially if its security solutions are widely deployed across Microsoft's network.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Qualys? Access our full analysis report here, it's free.

What is the market telling us:

Qualys's shares are not very volatile than the market average and over the last year have had only 3 moves greater than 5%. 

The biggest move we wrote about over the last year was 10 months ago, when the company dropped 7.8% on the news that competitor, Tenable (TENB), reported first-quarter revenue that narrowly beat analysts' expectations, although free cash flow missed. Also, sales guidance for the next quarter and full year fell short of the consensus estimates, which are major negatives for fast-growing SaaS stocks.

Qualys is down 11.2% since the beginning of the year, and at $170.29 per share it is trading 17.3% below its 52-week high of $205.89 from December 2023. Investors who bought $1,000 worth of Qualys's shares 5 years ago would now be looking at an investment worth $1,840.

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