On Wednesday, BMO Capital Markets adjusted its outlook on shares of Zscaler Inc . (NASDAQ:ZS), a leader in cloud-based security, by reducing its price target on the company's stock. The new target is set at $197, down from the previous target of $208, while the firm maintained its Outperform rating on the shares.
The revision follows Zscaler's report for the July quarter, which was deemed reasonable by BMO Capital. However, the firm expressed disappointment with Zscaler's back-end loaded fiscal year 2025 billings guidance. The first half of FY25 is projected to see billings growth of 13-14% year-over-year, with expectations for greater contracted billings to materialize in the second half of the fiscal year.
Despite the tempered billings guidance for the first half of FY25, BMO Capital finds reasons for optimism in Zscaler's performance. The firm highlighted Zscaler's expanding deal sizes and the increasing contributions from emerging products. These factors are seen as positive indicators that could enhance the company's growth prospects over time.
The price target adjustment reflects a cautious yet positive long-term view on Zscaler's stock, which was trading in the $165 range after hours. BMO Capital's maintained Outperform rating indicates the firm's belief that Zscaler will continue to perform better than the market or sector average over the next 12 to 18 months, despite the near-term guidance concerns.
In other recent news, Zscaler, a leading cybersecurity firm, has been the subject of multiple price target adjustments following its fourth-quarter fiscal year 2024 results. The company reported a 27% year-over-year increase in billings to $910.8 million, surpassing consensus estimates by $18 million or 2%.
Moreover, Zscaler's revenue saw a 30% boost to $592.9 million, beating expectations by 4.5%. Despite these robust results, Zscaler's fiscal year 2025 billings guidance indicates a slower pace in the first half of the year, with expectations of a pickup in the second half.
Goldman Sachs reaffirmed its Neutral rating on Zscaler, maintaining a price target of $177.00. Other notable investment firms such as Oppenheimer, Piper Sandler, Loop Capital, and Needham also revised their price targets while maintaining their respective ratings.
Zscaler's management has projected billings growth for fiscal year 2025 to range between 19% and 20% year-over-year, slightly exceeding analysts' expectations by 1%. The company also anticipates a 21% year-over-year increase in revenue, aligning with market predictions.
These recent developments reflect the transitional phase in Zscaler's sales leadership and the shift towards a more account-centric sales model. The company's collaborations with Google (NASDAQ:GOOGL) and NVIDIA (NASDAQ:NVDA) to enhance security measures and integrate advanced AI technologies were also noted as significant.
InvestingPro Insights
As Zscaler Inc. navigates through its fiscal challenges, real-time data from InvestingPro offers a comprehensive view of the company's financial health and market performance. Zscaler's market capitalization stands at a robust $29.2 billion, reflecting significant investor confidence in this cloud security leader. The company's revenue growth is also notable, with a 37.16% increase in the last twelve months as of Q3 2024, demonstrating its ability to expand its top-line in a competitive market.
InvestingPro Tips highlight several key aspects that investors should consider. Analysts anticipate sales growth in the current year for Zscaler, and the company is expected to become profitable within the same timeframe. These projections are supported by Zscaler's impressive gross profit margins, which reached 77.94% in the last twelve months as of Q3 2024. Moreover, with liquid assets exceeding short-term obligations, Zscaler maintains a strong liquidity position to meet its immediate financial commitments.
For those interested in further insights, there are additional InvestingPro Tips available that delve deeper into Zscaler's financial metrics and market potential. These tips can provide valuable context for BMO Capital Markets' recent price target adjustment and the maintained Outperform rating.
Investors seeking to make informed decisions on Zscaler can access a broader range of InvestingPro Tips and detailed financial analyses by visiting the InvestingPro platform.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.