Zscaler, Inc. (ZS) is a cloud security software-as-a-service (SaaS) provider with a global presence. The company’s stock has dipped as a result of the recent sell-off in high-growth and tech stocks. Despite reporting outstanding fourth-quarter financials, Zscaler’s stock is down nearly 24% year to date.
The business had a successful fiscal second quarter. ZS surpassed both earnings and revenue estimates, thanks to strong demand for its zero-trust security services. In the second quarter, the company’s revenue climbed by 63% year-over-year, while adjusted profitability increased by 18%.
The positive results imply that Zscaler is well-positioned to benefit from rising cybersecurity demand.
Favorable Conditions Globally
With the crisis between Russia and Ukraine intensifying, there could be a flurry of cybersecurity attacks on U.S. and European businesses and governments, by Russian-backed hacking organizations. As a result, there’s a good chance that government agencies and corporations are preparing to spend a lot of money to secure networks and data troves.
Given its massive scale, Zscaler is now one cyber security firm that is poised to benefit from such macro events.
With the help of artificial intelligence, Zscaler’s platform monitors over 200 billion web transactions per day, detecting and blocking over 150 million threats per day. In addition, Zscaler’s cloud-based zero-trust security solutions are gaining traction.
Expert’s Comment
According to Truist analyst Joel Fishbein, Zscaler should do well in the foreseeable future. He believes that the global business’s cloud migration trend is still young and that it will support heavy enterprise investments for a long time, benefiting companies like Zscaler. As a result, the analyst kept the stock with a Buy rating.
The analyst, however, decreased the target price to $335 per share from $350 due to valuation concerns, as rising interest rates are currently lowering the valuation of all growth equities.
Wall Street’s Take
On TipRanks, ZS stock commands a Moderate Buy consensus rating based on 19 Buys, five Holds, and one Sell. As for price targets, the average Zscaler stock price prediction of $311.75 implies almost 35.4% upside potential from the current levels.
Conclusion
Zscaler is delivering outstanding results and plays in a lucrative cyber security market with long-term growth prospects. Furthermore, given the escalating crisis in Ukraine, the rapid shift to the cloud, and the increased threats facing businesses and governments, Zscaler’s platform should see increased adoption, benefiting the company and its shareholders.
However, as the sector is getting increasingly saturated, with several competitors offering best-in-class services, ZS must stand apart in order to beat the market.
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