Please ensure Javascript is enabled for purposes of website accessibility

Why Zscaler Stock Is Heading Lower Today

By Timothy Green – Aug 19, 2019 at 12:55PM

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

The expensive stock is facing some volatility.

What happened

Sharers of cloud security provider Zscaler (ZS) sank on Monday, despite no company-specific news. The stock was down about 8% at 12:20 p.m. EDT; it was down as much as 11.6% earlier in the day.

So what

Shares of Zscaler have soared since the company went public in 2018. Over the past year, the stock has gained nearly 85%, even after Monday's plunge.

A lock.

Image source: Getty Images.

This rally has pushed Zscaler's valuation into the stratosphere, which may have something to do with the volatility plaguing the stock. Zscaler is valued at roughly $9.4 billion, nearly 35 times trailing-12-month sales. The company isn't profitable, although it is free cash flow positive over the past year.

While Zscaler stock is expensive, the company is growing fast. In the fiscal third quarter, revenue surged 61% year over year. Whether that growth is enough to justify the valuation is being tested as the stock heads lower.

Now what

Zscaler is scheduled to report its fiscal fourth-quarter results on Tuesday, Sept. 10, after the market closes. The company expects to report revenue between $81 million and $83 million, along with a small net profit on an adjusted basis. The midpoint of that revenue guidance range implies year-over-year growth of 45.9%.

It's not uncommon for pricey stocks to swing up and down for no concrete reason. For Zscaler investors, these fluctuations don't change the story.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Zscaler, Inc. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Zscaler Stock Quote

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

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