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On Friday, Needham raised the price target on Zscaler (NASDAQ: NASDAQ:ZS) shares to $310 from the previous $240, while reaffirming a Buy rating on the stock. Currently trading at $251.11, the stock has delivered an impressive 39% return year-to-date and is approaching its 52-week high of $259.40. The adjustment comes in the wake of Zscaler’s impressive quarterly performance, which surpassed analysts’ billings expectations. According to Needham, Zscaler’s recent financial results indicate a successful quarter. InvestingPro analysis suggests the stock is currently trading above its Fair Value, with multiple indicators available for deeper insight.
The firm’s management decided to apply the entire surplus from the third-quarter billings of the fiscal year 2025 to the full-year forecast and slightly increased the fourth-quarter billings projection, leading to a robust beat-and-raise scenario. With impressive revenue growth of 25.46% and industry-leading gross profit margins of 77.45%, the company continues to demonstrate strong operational execution. Additionally, Zscaler’s Remaining Performance Obligations (RPO) Bookings have seen a year-over-year growth of 36%, surpassing the $1 billion mark.
Needham analysts highlighted the transformative efforts of Zscaler’s Chief Revenue Officer, Mike Rich, in expanding the company’s platform and revising its go-to-market strategy. These initiatives appear to be effective, as Zscaler is now focused on forging deeper and more strategic customer relationships, aiming to capture a larger share of customer spending. This strategy is likened to the approach taken by ServiceNow (NYSE:NOW).
Despite the noted decrease in the number of new additions to the $100,000-plus Annual Contract Value (ACV) cohort, which fell by 16% year-to-date to 263, and the relatively stable number of new additions to the $1 million-plus ACV cohort at 75, Zscaler’s billing and RPO booking figures remain strong. With a market capitalization of $38.85 billion, this suggests that Zscaler is making significant progress in its business operations and customer engagement. For comprehensive analysis including 13 key ProTips and detailed valuation metrics, check out the full company research report available on InvestingPro.
In other recent news, Zscaler has reported impressive financial results for the third quarter of fiscal year 2025, with a 23% increase in revenue to $678 million and a 25% growth in billings to $785 million. The company’s annual recurring revenue (ARR) reached $2.9 billion, maintaining a 23% growth for the third consecutive quarter. This strong performance has led several analysts to adjust their price targets for Zscaler. Rosenblatt Securities raised its target to $315 while maintaining a Buy rating, and UBS followed suit with the same price target and rating. Cantor Fitzgerald increased its target to $290, keeping an Overweight rating, and TD Cowen lifted its target to $300, also reiterating a Buy rating. Mizuho (NYSE:MFG) Securities raised their target to $275, maintaining a Neutral rating. Zscaler’s strategic moves, including the acquisition of Red Canary and the introduction of the Z-Flex purchasing program, have been well-received, contributing to the company’s growth and market confidence. The acquisition of Red Canary is expected to enhance Zscaler’s capabilities in the security operations center space and expand its artificial intelligence offerings. These developments highlight Zscaler’s continued momentum and strategic positioning in the cybersecurity market.
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