Stock market investors came in Tuesday morning hoping that the Nasdaq Composite (^IXIC -0.64%) would be able to mount a comeback from Monday's declines at some point during the holiday-shortened week. It appeared the Nasdaq would get a bit of a respite, with futures trading higher by about a quarter-percent before the start of the regular trading session.
Technology stocks have had a particularly hard time during 2022, so for many investors, it wasn't too surprising to see Zoom Video Communications (ZM -0.99%) report results that once again came as a disappointment. However, the discount retail industry has generally been a bastion of strength as economic conditions have grown more challenging. That made the decline in Dollar Tree (DLTR -0.57%) stock more of a surprise. Below, you'll learn more about both companies and what sent their share prices lower Tuesday morning.
Zoom fears further slowdowns
Shares of Zoom Video Communications fell 8% in premarket trading on Tuesday morning. The move followed the release of the video conferencing giant's fiscal third-quarter results for the period ending Oct. 31.
Zoom's third-quarter numbers showed just how much the company's growth has slowed. Revenue of $1.1 billion was up just 5% year over year, with the strong U.S. dollar costing the company about 2 percentage points of potential sales growth. Adjusted net income of $323 million was down 4.5% from year-ago levels, although the resulting adjusted earnings of $1.07 per share came in better than most of those who follow the stock had expected.
Zoom has done its best to pivot toward enterprise customers, and revenue from them climbed 20% year over year, offsetting sales declines from its standard online segment. The company saw a 14% rise in enterprise customer counts to 209,300, nearly 3,300 of which contributed more than $100,000 to sales over the past 12 months.
Yet investors weren't satisfied with Zoom's near-term guidance, which called for full-year sales of $4.37 billion to $4.38 billion and adjusted earnings of $3.91 to $3.94 per share. Until economic conditions recover and until Zoom works through the grinding churn of more casual users who've chosen not to rely on its communications services any longer, shareholders can expect continued volatility in Zoom's stock price.
Dollar Tree's earnings guidance falls short
Shares of Dollar Tree didn't see declines of the same size that Zoom's stock suffered. Yet the 3% premarket decline early Tuesday took some investors by surprise, as the dollar store retailer's projections for the full 2022 year didn't live up to high expectations.
Dollar Tree's financial results were relatively solid. Revenue was up 8% to $6.94 billion, with same-store sales climbing 6.5%. As has been the case for a while now, comps for the namesake Dollar Tree stores outperformed the Family Dollar chain, this quarter by 4.5 percentage points. Moreover, the company managed to boost its gross margin, something most retailers have proven unable to do in the current macroeconomic environment. Earnings of $1.20 per share jumped 25% year over year.
Yet even though Dollar Tree increased its sales outlook for the remainder of the year, investors didn't like its new earnings projections. The dollar store retailer now expects revenue of $28.14 billion to $28.28 billion, up from $27.85 billion to $28.1 billion previously. Yet Dollar Tree expects its earnings to finish in the lower half of its guidance range of $7.10 to $7.40 per share, due largely to cost pressures.
Even with the minor setback, Dollar Tree's stock remains higher so far in 2022. That's a rarity in a bear market, but it speaks to the resilience of its business model and the fact that consumers are increasingly attracted to its bargain-priced merchandise.
