What happened
Week to date, shares of Zscaler (ZS 3.36%) were down 18% as of 11:15 a.m. ET on Friday, according to data provided by S&P Global Market Intelligence. The stock fell sharply after company President Amit Sinha announced he would resign on Oct. 21 to take a CEO position at a privately held technology business.
Shares have plunged 57% year to date -- a reflection of how badly software-as-a-service stocks have fallen out of favor on Wall Street. But given Zscaler posted 61% revenue growth last quarter, the pullback might be a good buying opportunity.
NASDAQ: ZS
Key Data Points
So what
The stock's plunge following the news is not surprising, since the departure of a high-level executive at any company is usually unwelcome news. But the market overreacted on this one. Sinha is not leaving for a competitor, according to Guggenheim analyst John DiFucci, who confirmed that information with the company. Sinha appears to be leaving for a better job -- period.
The analyst doesn't expect the departure to change Zscaler's near- or long-term prospects. Most importantly, Sinha will continue to serve on the company's board of directors.
Now what
Zscaler CEO Jay Chaudry credited Sinha's "technical brilliance and people leadership" for helping grow Zscaler into a leader in cloud security over the last 12 years. Clearly, Zscaler will lose a talented executive from its bench, even as competition increases. Cloudflare had recently touted customer wins against Zscaler on its last earnings call.
However, it's important that Sinha will still have input from his seat on the board of directors. Zscaler believes it is still in position to become a $5 billion annual recurring revenue business down the road. "I am confident in Zscaler's continued success and industry leadership in the coming years, and look forward to continuing my contributions as a board member," Sinha said in a statement.
The stock's 18% drop this week just means expectations are that much lower, which is good news for investors looking for a better entry point to buy shares of this fast-growing networking and cloud security provider.
