On Thursday, Stifel has adjusted its price target for Zscaler (NASDAQ:ZS) shares, a company specializing in cloud-based information security, reducing it from $270.00 to $220.00. Despite this change, the firm maintains a Buy rating on the stock.
The adjustment comes ahead of Zscaler's expected third-quarter fiscal year 2024 results, which are to be reported on May 30, 2024. The firm anticipates the company to deliver strong quarterly results but has observed mixed feedback from its end-of-quarter checks.
Stifel has expressed concern that consensus revenue forecasts for fiscal year 2025 may be overly optimistic. Consequently, the firm has revised its own revenue growth projections for Zscaler downward to 21.6% year-over-year from the previously estimated 24.6%, which is still below the street's expectation of 25.4% year-over-year growth.
The upcoming earnings call is expected to shed light on various aspects of Zscaler's business, including demand trends, fiscal year 2024 guidance, the impact of a recent test-environment breach, and the company's go-to-market strategy following leadership changes.
The firm also anticipates discussions on Zscaler's product announcements and the potential of artificial intelligence, competitive dynamics, product adoption trends, and the company's investment and profitability philosophy.
Despite mixed market sentiment, Stifel remains positive about the importance of Zero Trust as a cybersecurity priority and believes Zscaler's comprehensive portfolio positions the company well to enhance organizational security, consolidate vendors, and reduce costs.
Looking forward, Stifel sees several factors that can drive Zscaler's growth above 20% and enable margin expansion in the upcoming years. The firm's revised price target of $220 reflects these considerations.
InvestingPro Insights
As Zscaler (NASDAQ:ZS) prepares to report its third-quarter fiscal year 2024 results, real-time data and insights from InvestingPro provide a deeper understanding of the company's financial health and market performance. Notably, Zscaler's market capitalization stands at $27.14 billion, reflecting investor confidence in the company's cloud-based security solutions. The firm's impressive gross profit margin of 77.55% over the last twelve months, as of Q1 2023, underscores its ability to maintain profitability despite various market pressures.
InvestingPro Tips highlight that Zscaler holds more cash than debt on its balance sheet, a reassuring sign of financial stability, and analysts are optimistic about the company's net income growth this year. Moreover, Zscaler's liquid assets exceed its short-term obligations, further indicating the company's robust financial positioning. It's worth noting that these insights are just the tip of the iceberg; there are over 30 additional InvestingPro Tips available for Zscaler, providing a comprehensive analysis for investors seeking to make informed decisions.
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