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Why Zuora Stock Fell 15.7% in March

By Joe Tenebruso – Updated Apr 3, 2019 at 5:30PM

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Could this sell-off be a buying opportunity?

What happened

Shares of Zuora (ZUO -0.66%) declined more than 15% last month, according to data provided by S&P Global Market Intelligence, after the subscription management platform's fiscal 2019 fourth-quarter report disappointed investors.

So what

Zuora's total revenue jumped 29% year over year to $64.1 million, fueled by a 35% rise in subscription revenue, to $46.7 million. Zuora is gaining clients at a rapid clip; customers with an annual contract value of at least $100,000 increased 27% in the fourth quarter. 

Still, these figures represent a deceleration from previous quarters. Moreover, Zuora's adjusted net loss widened to $11.5 million from $10.3 million in the year-ago quarter. The company's first-quarter guidance -- which calls for revenue of $65.5 million at the midpoint of its projected range -- came in slightly below Wall Street's expectations of $66 million. 

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Image source: Getty Images.

Now what 

Zuora's role as a provider of cloud-based subscription billing software places it in a valuable position. From 2012 to 2018, subscription businesses grew revenue about five times faster than overall U.S. retail sales, according to Zuora. Moreover, MGI Research estimates the subscription economy will grow to $9.1 billion by 2022. And by 2023, 75% of companies selling direct to consumers will offer subscription services, according to Gartner. With these trends propelling Zuora's growth, the company's expansion remains in its early innings. As such, investors may want to use this recent pullback in its stock price as a buying opportunity.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Zuora. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.

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