Cloud-based security solutions provider Zscaler (ZS) is thriving in a strong demand environment created by increasingly sophisticated cybercrimes.
The demand for cloud-based security solutions is expected to remain strong for a long time now, given that work-from-home policies are here to stay.
A recent report by research firm ResearchAndMarkets valued the global cloud security market at $34.8 billion in 2021, and projected it to reach $67.6 billion by 2026, witnessing a CAGR of 14.2% within this period.
This outlook shows that the demand for cloud-based security solutions is expected to be consistent over the medium to long term.
Expert Opines
Piper Sandler analyst Rob Owens’ recent ZS stock analysis concluded that the ongoing digital transformation taking place across industries, combined with a strong security demand environment, is proving to be conducive to Zscaler’s operational performance.
He reiterated a Hold rating on the stock, and raised his price target to $365 from $285. Owens was encouraged after Zscaler posted impressive growth acceleration, surpassing $1 billion in annual recurring revenue for the first time. He mentioned that his Hold rating is solely based on valuation.
Furthermore, a quick run-through of ZS stock analysis on TipRanks shows that the company scores a “Perfect 10” from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
Competition, a Woe
Growing competition in the increasingly populous security application market is a matter of concern.
With the widespread use of the cloud, cyber-attacks are becoming more and more advanced and difficult to detect or combat. This is giving rise to the demand for stronger security solutions, and a market with burgeoning demand inevitably attracts more and more players.
Numerous companies have entered the security application market, most of them specializing in a niche domain. Zscaler’s dominance may be challenged by new entrants.
Wall Street’s Take
The Wall Street analyst consensus is cautiously positive about the stock, with a Moderate Buy rating based on 19 Buys, seven Holds, and one Sell. The average Zscaler price target of $391.48 indicates an upside potential of 31.3%.
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Disclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.
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