Wall Street has been on a bull run lately, and the Nasdaq Composite (^IXIC 2.02%) has led the charge. However, at least on the first day of August, it appears that the upward momentum in the Nasdaq might ease up a bit, as the index opened about half a percent lower on Tuesday morning.
Poor financial results from a pair of Nasdaq tech stocks weighed on the overall market. Neither ZoomInfo Technologies (ZI 4.13%) nor Zebra Technologies (ZBRA 1.60%) is necessarily a household name among rank-and-file investors, but they served as good examples Tuesday morning of what can happen when high-growth companies fail to meet the high expectations of their shareholders. Here are all the details you'll need.
ZoomInfo zooms lower
Shares of ZoomInfo Technologies opened lower by about 25% early Tuesday. The customer acquisition software specialist reported second-quarter financial results that showed solid growth, but warned that future performance might slow in the months to come.
ZoomInfo reported revenue of $309 million, up 16% from year-ago levels. Adjusted operating income showed a similar 17% rise year over year (YOY), and that produced adjusted earnings of $0.26 per share. Free cash flow also rose double-digit percentages to $121.5 million.
ZoomInfo pointed to several factors it's excited about. The marketing information provider finished the quarter with more than 35,000 customers, including almost 1,900 that spend $100,000 or more annually on their contracts. Moreover, ZoomInfo aggressively bought back almost 2.85 million shares of stock for roughly $22 per share, and it approved a new $500 million buyback program to replace the $100 million authorization it had just announced in March.
Yet investors weren't happy to see ZoomInfo project third-quarter sales to be roughly flat compared to the second quarter, and the company cut its sales forecast for the full year by $50 million to a new range of $1.225 billion to $1.235 billion. Even with a relatively low earnings multiple based on projections for about $1 per share in adjusted earnings, investors simply believe that ZoomInfo doesn't have what it takes to produce sustained growth in the future.
Zebra loses its stripes
Shares of Zebra Technologies, meanwhile, were down about 15% shortly after the open on Wall Street. The maker of bar-code technology and other portable specialty hardware for businesses reported second-quarter financial results that showed signs of slowing demand and reduced consumer spending.
Zebra reported a 17% drop in revenue YOY to $1.21 billion. That resulted in a 30% drop in adjusted net income to $170 million, which worked out to $3.29 per share. Looking more closely at the results, most of the downward pressure came from Zebra's enterprise visibility & mobility segment, where revenue plunged 25%.
Zebra has done a good job of reining in costs, and the company has doubled down on its efforts with a new expansion of its cost-cutting initiatives. A voluntary retirement plan could save Zebra incrementally on its costs, but it will result in near-term charges to provide inducement for employees to take advantage of the programs.
Worst of all, Zebra believes that investors will have to brace for even tougher results in the near future. The company expects third-quarter revenue to fall 30% to 35% from year-ago levels, and that could bring earnings down to between $0.60 and $1 per share on an adjusted basis. For the full 2023 year, sales will likely drop 20% to 23%, and Zebra chose not to offer full-year earnings estimates based on lower profitability and elevated inventory levels. That's disappointing for a company that had suggested three months ago that strong backlog figures could prompt better performance in time.