Zscaler (NASDAQ: ZS) is a cloud-security company whose Security Service Edge (SSE) platform, Zero Trust Exchange, is distributed across more than 150 data centers worldwide.
Shares of the cloud-security company have not fared well this year and have tanked 48%. This is even after the company delivered impressive Q3 results.
Interestingly, the stock is also seeing rising short interest from investors. Short interest indicates the number of shares that have been sold short by investors but have not yet been closed out. ZS saw significant short interest in the month of May.
A high short interest indicates a pessimistic stance on the part of investors. According to Nasdaq data, as of May 13, there was short interest totaling 7,379,950 shares, a rise of 35.7% from the total of 5,437,972 shares on April 29.
Even corporate insiders seem to have a negative stance on the stock. On June 3, Dali Rajic, the COO of Zscaler, sold $3.89 million worth of shares. Dali has had around 25 years of experience in operational and sales roles. Prior to joining Zscaler, Dali held senior leadership positions in sales at organizations like BMC Software and Verint.
Other corporate insiders, besides Dali, also seem to have a negative stance on the stock. The TipRanks Insider Trading page indicates that in the past three months alone, corporate insiders have sold shares worth $5.4 million. Overall, the insider sentiment is negative about Zscaler.
Wall Street analysts are optimistic
Deutsche Bank analyst Patrick Colville pegged ZS’s fiscal Q3 results as “respectable” and pointed out that the company’s Q4 outlook is a “clear positive and will help refute the bear narrative that Zscaler is on a continued slowdown path.”
While the analyst reiterated a Buy rating on the stock, Colville lowered the price target to $190 from $280. The analyst’s price target implies an upside potential of 21.1% at current levels.
Other analysts on the Street are also bullish about ZS with a Strong Buy consensus rating based on 21 Buys and three Holds. The average ZS price target of $210.92 implies an upside potential of 34.4% at current levels.
Bottom Line
Despite the fact that investors appear to have become pessimistic and corporate insiders have taken a negative stance on the stock, Wall Street analysts remain bullish due to Zscaler’s strong business fundamentals.
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