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Why Zuora Stock Plummeted on Thursday

By Daniel Sparks – Updated Sep 3, 2020 at 1:26PM

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The tech stock's guidance disappointed. Here's what investors should know.

What happened

Shares of Zuora (ZUO -4.01%) cratered on Thursday, falling about 33% as of 11:30 a.m. EDT.

The decline in the cloud-based subscription-management software company's stock follows its fiscal second-quarter earnings report. The market's pessimism for the stock on Thursday likely reflects the worse-than-expected revenue guidance management provided in the report for its fiscal third quarter.

A chart showing a stock price declining

Image source: Getty Images.

So what

Zuora's fiscal second-quarter revenue increased 8% year over year to $75 million, fueled by a 15% jump in subscription revenue. Analysts, on average, were expecting revenue of $73.5 million. Adjusted earnings per share was about breakeven -- an improvement from an adjusted loss per share of $0.09 in the year-ago period.

The tech company, however, missed expectations when it came to revenue guidance. Management said it expected fiscal third-quarter revenue to be between $73 million and $75 million, yet the consensus analyst estimate called for about $75.6 million. 

Now what

Despite the market's reaction to the report, management was upbeat, saying the company posted "solid" results. Furthermore, Zuora founder and CEO Tien Tzuo said in the company's earnings release that "demand for subscription business models remains strong and we continue to build the foundation for Zuora to lead the market for years to come."

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

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