BofA says ‘don’t count out’ Zscaler, Palo Alto as Microsoft enters SSE market

BofA analyst Tal Liani notes that Microsoft (MSFT) earlier this week announced the expansion of its Entra identity and access management suite into the secure service edge, or SSE, market with products Entra Internet Access and Entra Private Access, which will be competing directly with vendors like Zscaler (ZS), Palo Alto (PANW) and Fortinet (FTNT). While Microsoft’s entrance into the SSE market is a risk for Zscaler and Palo Alto Networks, the firm highlights “a few differences” compared to the cases of Microsoft having disrupting other cybersecurity markets such as identity, emails and endpoint security markets that suggest Zscaler and Palo Alto “may have a more defensible solution.” In other disrupted markets, Microsoft leveraged existing services to dominate the market, but in SSE, Microsoft mostly packages through its Identity position, which only covers certain use cases, says the analyst, who also focuses on the qualities of Zscaler and Palo Alto’s comprehensive solutions as key differentiators compared to Microsoft’s offerings. BofA has a Buy rating and $270 price target on Palo Alto Networks and a Buy rating and $175 price target on Zscaler shares.