Zoom is falling again, but this cloud security stock is on the rise

Monday didn’t generate much excitement from investors as market participants seemed uncertain what to expect from what could be a tumultuous week. With the Federal Reserve’s upcoming annual symposium in Jackson Hole potentially introducing more risk to the economic outlook, investors were bullish on stock markets. The Dow Jones Industrial Average (^ DJI -1.91%), S&P500 (^GSPC -2.14%)and Nasdaq Compound (^IXIC 0.00%) were down 2.5% on the day.


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Data source: Yahoo! Finance.

After the closing bell, losses continued for the video conferencing specialist Focus on video communications (ZM -2.07%), which published its latest financial report. However, another key player in the cloud space, Palo Alto Networks (PANW -1.06%), fares much better. Here is an overview of these two companies.

Zoom down

Shares of Zoom Video Communications were down 8% in after-hours trading on Monday afternoon, adding to the 2% drop it suffered in the regular trading session. The video pundit didn’t give investors the results they wanted to see, and he expects his immediate future could be uncertain for quite some time.

Zoom’s revenue growth nearly slowed to a halt, and its bottom line was hit hard. Sales of $1.10 billion were up only 8% year over year. Adjusted profit of $323.5 million was down 22% from the same period a year ago. The resulting adjusted earnings of $1.05 per share compares unfavorably to last year’s figure of $1.36 per share.

Some measures seemed more favorable. The number of customers on the enterprise side increased by 18% to more than 204,000. Net dollar expansion rates among enterprise customers reached 120% and Zoom had 37% more customers who spent at least $100,000 in the last 12 months for his service.

However, shareholders really didn’t like Zoom’s projections for the rest of its fiscal year. In the third quarter, the company expects flat sequential revenue of about $1.1 billion, with adjusted earnings of just $0.82 to $0.83 per share. For the full year, revenue of about $4.39 billion would produce adjusted earnings of $3.66 to $3.69 per share. For a stock that was once touted as a growth engine, Zoom is struggling to get things going again after its explosive gains in the early years of the COVID-19 pandemic.

Palo Alto joins the stock split crowd

Shares of Palo Alto Networks rose more than 9% in after-hours trading. The cybersecurity company announced favorable results for the fiscal fourth quarter ended July 31 and said it would proceed with a stock split.

Palo Alto’s numbers were solid. Revenue of $1.6 billion was up 27% year over year. Adjusted net income of $254 million increased 57% from the prior year quarter. Palo Alto even made money without accounting adjustments, marking the first time in four years that it had reached this milestone.

CEO Nikesh Arora was optimistic about Palo Alto’s momentum. The company’s next-generation security platform is enjoying tremendous popularity, and it has successfully seized sales opportunities to drive fundamental growth. The good news emerged in Palo Alto’s future guidance, which projects about $9 billion in revenue for fiscal year 2023, producing about $9.40 to $9.50 per share in adjusted earnings.

For some investors, the best news was that Palo Alto intends to conduct a 3-for-1 stock split. Investors receiving two additional shares for every share they currently hold starting Sept. 14, Palo Alto reports that he expects even better results in the future – and shareholders hope they benefit from the continued success of Palo Alto.

Dan Caplinger holds positions in Zoom Video Communications. The Motley Fool fills positions and recommends Palo Alto Networks and Zoom Video Communications. The Motley Fool has a disclosure policy.

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