Goldman Sachs has reaffirmed its Neutral rating on Zscaler (NASDAQ: NASDAQ:ZS) shares, maintaining a price target of $177.00. The cybersecurity firm's stock displayed a downturn of 12% in after-hours trading following the announcement of its fourth-quarter fiscal year earnings per share (EPS).
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%.
Additionally, the company anticipates a 21% year-over-year increase in revenue, with operating margins around 21% at the midpoint, aligning with market predictions.
The forecast for fiscal year 2025 billings suggests a stronger performance in the second half of the year, attributing the first half's expected challenges to broader economic factors and a decline in non-cancellable billings to be recognized in the first half of 2024. Non-cancellable billings are generally associated with the second and third years of a three-year contract and are billed annually.
Despite the positive outlook on Zscaler's strategic positioning in the Secure Access Service Edge (SASE) market, Goldman Sachs maintains its Neutral rating.
The firm is cautious, opting to monitor the company's normalized billings growth as Zscaler's primary product cycle matures and cross-selling initiatives gain traction, especially considering the second half of fiscal year 2025 is expected to show an uptick in performance.
In other recent news, Zscaler has seen a wave of revised price targets from various investment firms following its fourth-quarter fiscal year 2024 results. Oppenheimer lowered its price target to $230, maintaining an Outperform rating, while Piper Sandler reduced its target to $215, retaining an Overweight status.
Loop Capital also adjusted its target to $165, keeping a Hold rating on the stock. Needham revised its target to $235, but sustained a Strong Buy rating. Scotiabank, on the other hand, cut its target to $195, maintaining a Sector Outperform rating.
These adjustments come after Zscaler reported a 27% year-over-year increase in billings to $910.8 million, surpassing consensus estimates by $18 million or 2%. Additionally, the company's revenue saw a 30% boost to $592.9 million, beating expectations by 4.5%.
Despite these strong 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.
InvestingPro Insights
As Zscaler (NASDAQ:ZS) navigates its strategic positioning in the cybersecurity landscape, real-time data from InvestingPro provides a nuanced view of the company's financial health and market performance. With a market capitalization of $29.2 billion, Zscaler is a significant player in the industry. Despite a negative P/E ratio, which currently stands at -386.67, reflecting its lack of profitability in the last twelve months, analysts are optimistic about the company's future. They expect Zscaler's net income to grow this year, as indicated by an InvestingPro Tip. Moreover, Zscaler's gross profit margins remain impressive at nearly 78%, showcasing the company's ability to manage costs effectively.
InvestingPro Data also highlights a robust revenue growth of over 37% in the last twelve months as of Q3 2024, aligning with Zscaler's management projections of a 21% year-over-year increase in revenue for fiscal year 2025. Furthermore, the company's liquid assets surpassing short-term obligations and a moderate level of debt suggest a stable financial footing. The recent price movement has shown strength, with a solid 13.96% return over the last month, though the company does not pay a dividend to shareholders.
For those interested in deeper analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/ZS, including insights into sales growth and profitability expectations for the current year. With 12 more tips to explore, investors can gain a comprehensive understanding of Zscaler's potential trajectory and make informed decisions.
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