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Zuora stock slumps 15% despite Q3 beat as outlook disappoints Wall Street

Zuora (NYSE:ZUO) stock fell ~17% on Wednesday after the company reduced its FY22 revenue outlook.

The company's results and stock movement also brought about a flurry of price target cuts.

Jefferies reduced the price target to $7 from $9 keeping a Hold rating and noted that the results showed ongoing underperformance, with subscription billings growth at its lowest level since the pandemic, according to Bloomberg.

Zuora lowered its subscription revenue outlook to be between $336.5M and $337.5M, compared to prior outlook range of $337M to $341M, provided during Q2 results. The full year fiscal 2023 total revenue guidance was also cut to be between $392.5M and $394.5M, versus prior forecast of $394M to $400M (consensus $394.07M).

The company also provided subscription revenue growth outlook for fiscal 2024 and expects it to be between 11% to 14%.

However, Jefferies analyst noted that the firm questions if the fiscal 2024 subscription revenue growth outlook was fully de-risked given the magnitude of deceleration in subscription billings.

Needham which has a Buy rating on ZUO and a price target of $15 said that the results were solid but the outlook was disappointing.

Needham analyst noted that Zuora can recover with an improving economy as win rates are not deteriorating and top of funnel activity is strong. However, the company's exposure to technology customers was a challenge as the segment is the center of weakness, Bloomberg reported citing the analyst.

Craig Hallum also cut Zuora's price target to $10 from $16.

Zuora Q3 subscription revenue grew 17% Y/Y to $86.6M. While total revenue increased 13% Y/Y to $101.1M, beating analysts estimates.

The company said customer usage of Zuora solutions grew, with $21.5B in transaction volume through Zuora's billing platform during Q3, up +15% Y/Y and 17% on a constant currency basis.

Non-GAAP income from operations was $0.6M, compared to a loss of -$1.2M in the prior year period. Meanwhile Q3 non-GAAP net loss was -$2.9M, compared to -$2.5M in the third quarter of fiscal 2022.

Cash and cash equivalents and short-term investments were $400.6M as of Oct. 31.