Zscaler stock drops sharply as outlook disappoints Wall Street
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Zscaler (NASDAQ:ZS) shares dropped sharply in early trading on Friday after the cybersecurity company posted better-than-expected earnings, but its guidance proved to disappoint investors and industry analysts.
Wedbush Securities analyst Dan Ives, who has an outperform rating on Zscaler's (ZS) stock, noted that "whisper expectations for the quarter" were hoping for a stronger forecast for all of 2022. The company said it expects to revenue to be between $270 million and $272 million in the third quarter and $1.045 billion to $1.05 billion for the full-year. 
"While every hyper growth name with premium valuations are in the penalty box in this risk-off white knuckle market, ZS is in the early days of leading the way on zero trust architecture and protecting cloud workloads," Ives wrote in a note to clients.
Ives also lowered the price target on Zscaler to $330 a share from $400, citing a "lower multiple in this backdrop."
Zscaler shares fell nearly 20% to $209.58 in early trading on Friday.
For the fiscal second quarter, Zscaler earned 13 cents a share on $255.56 million in revenue, up 62.8% year-over-year.
Earlier this month, Wedbush's Ives said that Zscaler, along with Palo Alto Networks (NASDAQ:PANW), could report "rock solid" earnings results, as the shift to the cloud and federal spending continues to be tailwinds.