Why Zscaler, GameStop, and Turning Point Brands Slumped Today

Wednesday was a good day on Wall Street, with the major benchmark indexes posting gains. There are still plenty of uncertainties that market participants have to deal with, including the increasingly fragile state of certain parts of the global economy. Some stocks, though, missed out on the celebration. Zscaler (NASDAQ: ZS), GameStop (NYSE: GME), and Turning Point Brands (NYSE: TPB) were among the day's worst performers. Here's why their stocks did so poorly.

Zscaler disappoints despite solid results

Shares of Zscaler fell 19% after the company reported fiscal fourth-quarter financial results that did not satisfy its investors. The cloud security specialist said that revenue growth came in at an impressive 53% year over year, and the company posted positive earnings on an adjusted basis. Yet even though customer counts rose, net retention rates were stable, and churn rates fell, Zscaler's revenue projections for fiscal 2020 imply a much slower top-line growth rate of around 32%. Moreover, full-year earnings could fall from fiscal 2019 levels. It all added up to disappointment for growth-hungry investors, which suggests that Zscaler will have to work harder from here to surpass its guidance.

Graphic showing multiple clouds linked by glowing lines.

Image source: Getty Images.

Game over for GameStop?

Video game retailer GameStop's stock lost 10% following the release of its second-quarter financial results. GameStop said that revenue fell 14% year over year, with an 11% drop in comparable-store sales coming largely from weakness in sales of new gaming consoles and other hardware. Pre-owned sales also suffered, and GameStop had to take a massive $400 million impairment charge that dramatically inflated its net losses. CEO George Sherman concentrated his efforts on cost reduction and closing unprofitable stores, but shareholders are increasingly uncertain about whether those moves will be sufficient to save the ailing niche retailer in the long run.

Turning Point could go up in smoke

Finally, shares of Turning Point Brands finished lower by about 6%. The company has taken a unique approach to tobacco, marketing cigarette papers, pipe tobacco, and make-your-own cigar products and accessories. Yet it has also been a significant player in next-generation vaping products, and Wednesday's call from the U.S. Food and Drug Administration for a ban on flavored e-cigarettes could have a detrimental impact on that part of its business. Given how important vaping products have been for Turning Point's growth, any new regulation could have a notable impact on the company's bottom line.

Offer from The Motley Fool: The 10 best stocks to buy now

Motley Fool co-founders Tom and David Gardner have spent more than a decade beating the market. In fact, the newsletter they run, Motley Fool Stock Advisor, has quadrupled the S&P 500!*

Tom and David just revealed their ten top stock picks for investors to buy right now.

Click here to get access to the full list!

*Stock Advisor returns as of June 1, 2019

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Zscaler, Inc. The Motley Fool owns shares of GameStop. The Motley Fool has a disclosure policy.

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

In This Story


Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More