The stock was lower Friday after guidance from the cloud-based internet security company dampened investor enthusiasm, even as its second-quarter results easily beat estimates.
) fell by 18.4% to $214.82 on Friday. Shares have lost 33% this year.
For the third quarter ending in April, Zscaler expects earnings of about 10 cents a share and 11 cents a share on revenue of $270 million to $272 million, in line with a forecast of 11 cents a share and above revenue estimates of $267.4 million.
The company expects fiscal year 2022 revenue to be $1.045 billion to $1.05 billion, with between $1,365 and $1.37 billion in billing calculated. The company said adjusted earnings would be between 54 cents and 56 cents a share for the year. Wall Street expects earnings of 55 cents a share for $1.035 billion in revenue.
“The stock is under pressure as expectations were whispered for the quarter Hoping to get a stronger proof For ZS in fiscal year 22, which we view as a quick reaction and a clear buying opportunity,” Wedbush analyst Daniel Ives wrote in a research note on Friday.
Another source of investor concern is that while Zscaler’s second-quarter results beat estimates, “The tempo was not in the range we saw previously,” wrote Matthew Hedberg, an analyst at RBC Capital Markets.
Zscaler’s second-quarter adjusted earnings per share were 13 cents, beating estimates of 11 cents on revenue of $255.6 million, beating expectations of $241.5 million.
Hedberg added that some analysts expressed concern about the company’s slowdown in billing, which slowed to 59%, compared to 71% in the previous quarter. The analyst maintained its outperform rating, but lowered its price target to $330 from $408 due to multiple peer pressure.
Mizuho Securities analyst Greg Moskowitz agreed that the company’s billing performance could be the main thing driving the stock lower on Friday. During the conference call, management noted that the federal sales segment was only down from single digits due to budget constraints. Despite this, Moskovitz noted that the bills are short-lived Growth was strongIt appears to be slowing down modestly compared to the total bills.
“In short, we understand the sell-off of AH, but essentially we remain confident that everything is alive and well in ZS,” he wrote in a research note on Friday.
Moskowitz repeated the buy rating, but lowered the target price to $350, down from $360.
Wedbush’s Ives also maintained his superior rating, saying Zscaler still represents an opportunity. He believes that the company can be a leader in Cloud protection field, making it a unique grow-out name to own. Regardless, he also lowered his price target from $400 to $330, which reflects a lower multiplier on the current market backdrop.
Analyst’s feelings have Overall improvement in stock, with more than 70% of analysts covering the stock in FactSet, rated it as overweight or overbought. The average target price is $342.56.
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