On Tuesday, KeyBanc Capital Markets updated its outlook on Zscaler (NASDAQ:ZS), a leader in cloud-based security services with a current market capitalization of $32 billion. The firm raised its price target on the company's stock to $250 from the previous $245, while maintaining an Overweight rating. According to InvestingPro data, analyst targets for Zscaler currently range from $177 to $270, reflecting diverse market expectations.
The adjustment follows Zscaler's recent financial performance which included a solid, if modest, billings beat and upward revision of future earnings. The company's first-quarter billings surpassed expectations, which stands out amidst a backdrop of mixed security earnings results reported this quarter by other companies. With impressive gross profit margins of 78% and revenue growth of 34% year-over-year, Zscaler demonstrates strong operational efficiency.
Despite concerns over the magnitude of Zscaler's billings beat and the announced retirement of the Chief Financial Officer before a significant expected revenue ramp in the second half of the year, KeyBanc remains optimistic. The firm believes that the initial success in the first quarter will lead to a more moderate ramp in the latter half of the year.
KeyBanc highlighted Zscaler's strong position in the Secure Access Service Edge (SASE) market and its growing portfolio of emerging products which can be cross-sold. The company has also recently revamped its go-to-market leadership team, which is expected to enhance sales to C-suite executives.
The firm's confidence in Zscaler is further bolstered by the 23% growth in contracted billings for the second half of the fiscal year, which supports an anticipated mid-20s percentage growth rate by the end of FY25. In light of these factors, KeyBanc has raised its revenue, billings, free cash flow, and EPS estimates for Zscaler for FY25 through FY27.
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In other recent news, Zscaler, a leader in cloud-based security, has seen a series of recent developments.
The company reported a growth of over 20% in first-quarter billings and a revenue growth of 34.07%, surpassing its own guidance. Piper Sandler raised its price target on shares of Zscaler to $235 from $215, maintaining an Overweight rating. The analyst from Piper Sandler cited several factors that reinforce a positive outlook, including impressive gross profit margins of 78% and robust revenue growth of 34% in the last twelve months.
However, Loop Capital adjusted its price target for Zscaler from $200 to $195, citing risks associated with the company's high billing growth expectations and the announced retirement of the Chief Financial Officer. Despite this, Citi raised its price target for Zscaler to $235, maintaining a Buy rating, following the company's strong first-quarter performance. Similarly, Scotiabank (TSX:BNS) reiterated an outperform rating, raising the target to $205.
These are recent developments, providing investors with a snapshot of Zscaler's current position. Despite the retirement of the CFO, analysts believe that Zscaler will continue to perform well and maintain its strong position in the cybersecurity market.
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