Please ensure Javascript is enabled for purposes of website accessibility

Why Zuora Stock Fell Friday

By Daniel Sparks – Updated Apr 14, 2019 at 8:14PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Robust fourth-quarter growth wasn't good enough for investors.

What happened

Shares of subscription-management platform Zuora (ZUO 4.54%) tumbled on Friday, falling about 15% as of 11:41 a.m. EDT.

The stock's decline followed Zuora's fiscal 2019 fourth-quarter update, which featured strong growth but also included weaker-than-expected revenue guidance.

A chalkboard sketch of a chart showing a stock price moving lower.

Image source: Getty Images.

So what

For its fourth quarter, Zuora saw its revenue rise 29% year over year to $64.1 million. Subscription revenue rose 35% year over year to $46.7 million. Meanwhile, Zuora's non-GAAP net loss widened from $10.3 million in the fourth quarter of fiscal 2018 to $11.5 million in the fourth quarter of fiscal 2019.

Strong growth was helped by a 27% year-over-year increase in customers with an annual contract value of $100,000 or greater.

But Zuora's guidance for first-quarter revenue disappointed.

Check out the latest earnings call transcripts for the companies we cover.

Now what

Under Zuora's new revenue recognition standard, ASC 606, Zuora guided for first-quarter revenue between $63.5 million and $64.5 million. This equates to $65 million to $66 million under the company's previously used revenue recognition standard, ASC 605 -- the standard analysts likely based their forecast on.

Analysts, according to data from Yahoo! Finance, were expecting fiscal first-quarter revenue of $65.6 million -- higher than the midpoint of Zuora's fiscal guidance range for the metric.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of Zuora. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.