On Wednesday, Piper Sandler adjusted its outlook on Zscaler (NASDAQ:ZS), a prominent player in cloud-based security. The firm reduced the stock's price target to $215 from the previous target of $255 while keeping an Overweight rating on the shares.
The adjustment followed Zscaler's fiscal fourth-quarter performance, which saw the company exceed expectations on all fronts. Despite the positive results, the stock experienced a decline during after-hours trading, which negated gains accumulated over the prior month. This downturn was attributed to a billing mix that leaned heavily toward the latter part of the quarter, influenced by various factors.
Piper Sandler expressed confidence in Zscaler's capacity for deal-making and execution, noting that the underlying trends toward larger deals remained strong. The firm's stance suggests belief in the company's potential for future growth and its position in the market.
The revised price target of $215 reflects Piper Sandler's anticipation of Zscaler's trajectory, while the Overweight rating indicates the firm's view that the stock could outperform the average return of the stocks the firm covers over the next 12 to 18 months.
Zscaler's recent performance and the subsequent price target adjustment by Piper Sandler highlight the dynamic nature of stock valuations in response to market conditions and company performance metrics.
In other recent news, Zscaler, a cloud security leader, has been the subject of multiple price target adjustments by various investment firms following its latest financial results. Loop Capital lowered its price target to $165 while maintaining a Hold rating.
Needham also adjusted its price target from $290 to $235, but has maintained a Strong Buy rating. Scotiabank revised its price target from $210 to $195, maintaining a Sector Outperform rating. Baird lowered its price target to $225 from $260, but kept its Outperform rating. Rosenblatt held its Neutral rating and a consistent price target of $190.
Zscaler reported a 27% year-over-year increase in billings to $910.8 million, surpassing consensus estimates by $18 million or 2%. The company's revenue also saw a 30% increase to $592.9 million, beating expectations by 4.5%. However, Zscaler's initial fiscal year 2025 billings guidance indicated a heavier weighting towards the second half of the year.
These recent developments highlight the transitional phase in Zscaler's sales leadership and the shift towards a more account-centric sales model, which presents substantial execution risks. 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
In light of Piper Sandler's revised outlook for Zscaler, key metrics and insights from InvestingPro offer additional context for investors. Zscaler's market capitalization stands at a robust $29.2 billion, reflecting significant investor interest. The company's impressive gross profit margin, reported at nearly 78% for the last twelve months as of Q3 2024, underscores its strong operational efficiency in the cloud-based security sector.
InvestingPro Tips highlight that analysts are optimistic about Zscaler's financial future, expecting net income and sales growth in the current year. This aligns with Piper Sandler's confidence in Zscaler's deal-making capacity and growth potential. Moreover, with liquid assets surpassing short-term obligations, Zscaler demonstrates a healthy financial position to support its expansion strategies. It's worth noting that while the company has not been profitable over the last twelve months, analysts predict profitability for this year, offering a potential upside for investors. Additionally, with a high return of 21.98% over the last year, Zscaler has shown resilience in its stock performance.
For investors seeking a deeper dive into Zscaler's financial health and future prospects, InvestingPro provides a comprehensive set of additional tips, available at: https://www.investing.com/pro/ZS
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