Market News

Zscaler Reports Blowout Q3 Earnings; Shares Pop 8.4% After Hours

Zscaler, Inc. (ZS), a leading cloud-based security solutions provider, recorded blowout Q3 earnings, outpacing consensus estimates. Shares popped 8.4% in the extended trading session on Tuesday.

Earnings more than doubled to $0.15 per share compared to the prior-year period and surpassed the Street’s estimate of $0.07 per share.

Revenue came in at $176.40 million, up 60% year-over-year, and outpaced analysts’ expectations of $163.71 million.

Deferred revenue for the quarter stood at $495.43 million, up 65% year-over-year and calculated billings increased 71% to $225.02 million for the same period.

The company offers a full range of enterprise network security solutions including internet security, web security, vulnerability management, firewalls, and antivirus solutions. (See Zscaler stock analysis on TipRanks)

Jay Chaudhry, Chairman, and CEO of the company said, “Our Zero Trust Exchange platform is helping customers realize their digital transformation goals and architect for the new normal of the work-from-anywhere economy…Our strategic position with customers continues to strengthen, and we are executing well on our go-to-market initiatives. With strong business momentum, we are pleased to again increase our fiscal year guidance.”

Looking ahead, the company projects Q4 revenue and EPS to fall in the range of $185 million to $187 million and $0.08 – $0.09 per share. Consensus for the same is pegged at $173.9 million and $0.09 per share, respectively.

For Fiscal 2021, revenue is forecast to be in the range of $660 – $664 million, with calculated billings of $878 – $880 million, and EPS of $0.47.

Following the results, Canaccord Genuity analyst Michael Walkley maintained a Buy rating on the stock and said, “Our positive thesis on Zscaler is based on its ability to securely facilitate customers’ cloud adoption initiatives, which is disrupting an estimated $20B+ spent annually on the entire perimeter defense stack.”

Walkley added, “With the stock down ~14% YTD, we think the re-rating creates a more favorable entry point for a core security holding. The company is poised to continue to gain share as a long-term disruptive technology, and we believe the stock should be a core long-term holding for investors.”

The analyst assigned Zscaler a price target of $250 implying 44.7% upside potential to current levels. Shares have gained 125.7% over the past year.

The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 8 Buys and 3 Holds. The average analyst price target of $223.09 implies 29.2% upside potential to current levels.

According to TipRanks’ Smart Score system, Zscaler gets a 7 out of 10, which indicates that the stock is likely to perform in line with market averages.

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