Why Shares of Zendesk Inc. Tumbled Today

What: Shares of cloud software company Zendesk tumbled on Friday along with many of its peers. A steep decline in many high-flying tech stocks, as well as weak guidance from fellow cloud software company ServiceNOW , appear to be the drivers behind the drop in Zendesk's stock. At 11 a.m. ET Friday, Zendesk stock was down about 15%, while shares of ServiceNOW had tumbled 13.5%.

So what: Zendesk is set to report its fourth-quarter results on Feb. 16, and the guidance the company issued following its third-quarter results was above analyst expectations. But ServiceNOW, while beating analyst estimates for both revenue and earnings, missed estimates for billings and provided 2016 revenue guidance that was below analyst expectations.

ServiceNOW's billings and guidance shortfall wasn't very big, but with a variety of high-flying tech companies providing disappointing guidance, ranging from LinkedIn to Tableau , the entire sector is selling off. Zendesk is being caught up in this mess, with the stock carving out a new 52-week low in the process.

Now what: Given the weak guidance coming from other enterprise software and services companies, which is being driven by global economic uncertainty, Zendesk may issue cautious guidance of its own when it reports earnings later this month. This concern is pushing the stock down today, and a tumbling stock market certainly isn't helping.

For investors, it's the long-term picture that matters. Even if Zendesk does provide disappointing guidance, a single quarter doesn't make a trend.

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The article Why Shares of Zendesk Inc. Tumbled Today originally appeared on

Timothy Green has no position in any stocks mentioned. The Motley Fool owns shares of and recommends LinkedIn. The Motley Fool recommends Zendesk. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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