Here's Why Zscaler Shares Dropped 16% in December
Zscaler (NASDAQ: ZS) stock fell more than 16% last month following its quarterly earnings report on Dec. 1. Even though its results exceeded expectations, the cybersecurity stock couldn't overcome fears about slowing growth in the tech sector. Zscaler slumped further throughout December amid broader market weakness.
The market's reaction to Zscaler earnings is confusing at first glance. The company reported 54% revenue growth along with a 55% increase in deferred revenue, which is a measurement of signed contracts that will be recognized in the future. It also provided slightly higher gross margin relative to the prior year. Zscaler was still unprofitable on a generally accepted accounting principles (GAAP) basis, but it produced positive cash flows, with nearly $130 million in cash from operations last quarter. Even though the company isn't profitable, it's achieving excellent growth without burning cash.
It's not a case of falling short of lofty expectations, either. Zscaler beat analyst forecasts for both sales and adjusted income. The company's guidance met Wall Street forecasts for revenue and adjusted earnings.
Source Fool.com
