UBS raises Zscaler stock price target to $315, maintains Buy rating

On Friday, UBS analyst Fatima Boolani increased the price target for Zscaler (NASDAQ:ZS) shares to $315 from the previous $260, while reaffirming a Buy rating for the cybersecurity company. Currently trading at $251.11, Zscaler is approaching its 52-week high of $259.40, with a remarkable year-to-date return of 39.19%. According to InvestingPro analysis, the stock appears to be trading above its Fair Value. The revision follows Zscaler’s third-quarter performance, which Boolani highlighted as particularly strong compared to other cybersecurity firms’ results in April.

Zscaler’s third-quarter earnings reported billings growth of 25% year-over-year, surpassing the guided 21%. The company maintained impressive gross profit margins of 77.45% while achieving overall revenue growth of 25.46%. The company also exceeded expectations with its free cash flow, which was 14% above the street’s consensus, and its operating margin, which was 44 basis points higher than anticipated. Boolani noted the company’s consistent improvement in sales execution, citing unscheduled billings growth of 28%, an increase from the 20% and 25% growth seen in the first and second quarters, respectively.

New customer acquisitions were also robust, with new logo annual contract value (ACV) growing 40% year-over-year. Boolani’s analysis looked ahead to Zscaler’s potential by 2025, emphasizing that the company’s platform is gaining momentum. Zscaler is now engaging with approximately $1 billion in annual recurring revenue (ARR) from emerging growth categories such as Zero Trust Everywhere, Data Security, and Agentic Operations, which are expanding faster than the overall ARR.

The upcoming acquisition of Red Canary, expected to be finalized in August, was also a point of interest for Boolani. Red Canary will contribute artificial intelligence capabilities specific to Security Operations Center (SOC) and threat detection, as well as valuable expertise in the security operations field. With a market capitalization of $38.85 billion, Boolani concluded by reaffirming a positive outlook on Zscaler shares, which are currently trading at 11 times the CY26E enterprise value to sales (EV/S) ratio. For deeper insights into Zscaler’s valuation and growth prospects, InvestingPro subscribers can access 13 additional ProTips and a comprehensive Pro Research Report, part of the platform’s coverage of 1,400+ US stocks.

In other recent news, Zscaler’s financial performance has drawn significant attention, with multiple analysts revising their outlooks on the company. Zscaler’s earnings and revenue results for the third fiscal quarter exceeded expectations, leading to upward revisions in future financial forecasts. TD Cowen raised Zscaler’s stock price target to $300, maintaining a Buy rating, while BMO Capital Markets increased their target to $295, also keeping an Outperform rating. Wolfe Research and JMP Securities both set their price targets at $310, reflecting continued confidence in Zscaler’s growth prospects. Stifel also raised their price target to $295, maintaining a Buy rating, highlighting the company’s strong execution and demand for its zero trust security portfolio. Analysts noted Zscaler’s resilience in an uncertain macroeconomic environment and its strategic initiatives, such as the acquisition of Red Canary, which enhances its security operations capabilities. The company’s financial guidance for fiscal year 2025 was revised upwards, including increases in billings, revenue, and free cash flow margins. These developments underscore Zscaler’s expanding market leadership and its ability to deliver robust financial results amidst challenging conditions.

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