These 2 Tech Stocks Drop After Hours Thursday |  The Motley Fool

These 2 Tech Stocks Drop After Hours Thursday | The Motley Fool

The stock market got off to a mixed start in the final month of the year, as various major market benchmarks moved in different directions on Thursday. A blow to a key tech stock component slammed the Dow Jones Industrial Average (^ DJI -0.56%) relatively hard, but the Nasdaq Compound (^IXIC) managed to post gains for the day, and the S&P500 (^GSPC -0.09%) finished almost unchanged.


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Data source: Yahoo! Finance.

Most companies have already released their quarterly results, but a select group of tech stocks are typically waiting until this point in the quarter to release their final results. Two other key reports came out late Thursday, and both Z-scale (ZS 8.28%) and Asana (ASAN -0.44%) saw their stock prices fall in response. Below, you’ll learn more about what the two tech companies said about trading terms and why shareholders seemed concerned about their immediate prospects.

Zscaler shares fall despite solid growth

Zscaler shares were down 11% in after-hours trading Thursday afternoon. The move wiped out an 8% gain in the regular trading session and came after the cloud security software provider announced fiscal first-quarter financial results for the period ending Oct. 31, which disappointed some investors.

Zscaler’s growth in key financial metrics certainly didn’t seem to warrant such a bad reaction from shareholders. Revenue of $355.5 million increased 54% year over year. Adjusted net income more than doubled from prior year levels to $44.4 million, or $0.29 per share, and free cash flow improved to $96 million for the period. Zscaler calculated billings increased 37% over the same period last year, and deferred revenue passed the $1 billion mark, up 55% from the first quarter of fiscal 2022.

Still, investors didn’t seem happy with the cloud security provider’s outlook for the full fiscal year 2023. Zscaler expects sales to be between $1.525 billion and $1.53 billion, which would represent a considerable growth from the approximately $1.09 billion the software company brought in in fiscal 2022. Zscaler also sees earnings improve to between $1.23 and $1.25 per share on an adjusted basis , with considerable bias in billing growth coming in the second half.

Stocks have been volatile recently, especially in the Software as a Service (SaaS) space. Downside reactions can reverse within the same day, so it’s hard to draw long-term conclusions about Zscaler’s share price decline on Thursday afternoon.

Asana works for more growth

Shares of Asana also fell, falling 12% after hours on Thursday. Still, many of Asana’s fundamental business metrics for the third quarter ending October 31 still looked solid.

Asana’s financial report told a somewhat mixed story. The work management software platform provider’s revenue grew 41% year-over-year to $141 million, with Asana gaining 78% more customers spending at least $100,000 a year on its software and approaching nearly 500 large customers. Net dollar retention rates for these large customers exceeded 140%, with overall levels exceeding the 120% mark.

However, adjusted net losses widened slightly from year-ago levels, with the company posting a net loss of $0.26 per share. Cash outflows also worsened considerably compared to the same period a year earlier.

Even with a mixed picture, Asana’s sales outlook looked optimistic. The company estimates that revenue is expected to increase 43% in fiscal 2023 to between $541 million and $543 million. Again, however, earnings are likely to elude the labor management software specialist, as Asana forecasts adjusted losses of $1.14 to $1.15 per share.

It has been frustrating in 2022 to see stocks perform well one quarter and then underperform the next. Still, the key for Asana will be finding a clearer path to making money as soon as possible to appease nervous investors.

Dan Caplinger has no position in the stocks mentioned. The Motley Fool fills posts and recommends Asana and Zscaler. The Motley Fool has a disclosure policy.

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