Fiscal-second-quarter earnings of 9 cents a share beat expectations by 6 cents, while revenue of $101.3 million grew 36% year-over-year and topped analysts’ expectations by $2.25 million.
But a top- and bottom-line beat wasn’t enough as the San Jose, Calif., company’s earnings forecast came up short of consensus expectations.
Interestingly, management’s fiscal third-quarter and full-year revenue outlooks were ahead of estimates, while the midpoint of the full-year earnings outlook matched estimates.
The slight shortfall for the third quarter - with an outlook of 1 to 3 cents a share of profit - missed the consensus estimate of 4 cents. Down 15% on that catalyst seems somewhat extreme, especially as revenue topped estimates.
Let’s take a closer look at Zscaler, which was named Real Money’s Stock of the Day.
Trading Zscaler Stock
The earnings headline was good and the guidance was pretty solid, save for the slight bottom-line miss next quarter. That said, Zscaler stock wasn’t necessarily discounting a bad quarter coming into the report.
The shares were at their highest level of 2020 and up about 65% from the October lows. At the same time, they were off the 52-week high of $89.54.
Does this leave investors in a position to buy the dip?
From the way the chart lines up, we see a potential “yes.”
Aggressive bulls may consider buying on Friday's dip, especially if Zscaler inches a bit lower. The stock is approaching the 50-day moving average and has $55 support nearby.
Trouble is I don’t like to buy stocks on big up or down days right after notable events. I like to see how a company's shares shake out over the following few days.
Second, this support zone is less significant than the one below, meaning it may not hold.
This larger support zone may be better for conservative bulls and comes into play between $50.38 and $52.50.
At the former is the 200-day moving average, while the latter was a very notable level of resistance in second-half 2019. Sandwiched in between is uptrend support (blue line).
This is the support zone I'd prefer to buy into. But should Zscaler stock break below all three of these marks, then the bulls can pull the plug on their long positions and stop out of the trade with minimal damage.
No matter where support comes into play, see if Zscaler shares can reclaim the 20-day moving average on the upside. Above that and a bounce toward $62.50 is possible, and eventually, a gap-fill up toward $65.
But let’s not get ahead of our skis here. First, we need to see where support comes into play.