On Friday, Baird maintained its positive stance on Zscaler (NASDAQ:ZS), a company specializing in cloud-based security solutions, reiterating an Outperform rating with a stable price target of $225.00. The endorsement follows a series of investor meetings with Zscaler's management, which reinforced the firm's confidence in the company's business trajectory for the second half of the year.
During the meetings earlier this week, senior vice president and head of product Steve House, along with the head of investor relations, Ashwin Kesireddy, discussed the company's strategic initiatives. Baird highlighted Zscaler's revamped go-to-market strategy, which focuses on targeting the Global 2000 enterprises and benefits from the experience of its seasoned sales leadership.
The firm expressed optimism about Zscaler's ability to accelerate its annual recurring revenue (ARR) growth in the second half of the year. This optimism is based on the company's strategic positioning and the increasing adoption of zero-trust security models, even among traditionally conservative sectors.
Baird's analysis points to Zscaler's competitive advantages in the security space, particularly its effectiveness in securing workloads and preventing lateral movement within networks. These capabilities are seen as differentiators that set Zscaler apart from both legacy security solutions and other cloud-security peers.
The firm's commentary underscores the belief that Zscaler is well-positioned to capitalize on the significant market opportunities ahead, driven by the evolving cybersecurity landscape and the shift towards zero-trust architectures.
In other recent news, Zscaler and CrowdStrike (NASDAQ:CRWD) have announced new integrations aimed at enhancing cybersecurity operations through advanced threat detection, response, and risk management. This collaboration introduces the Falcon Foundry for Zscaler app, designed to facilitate threat intelligence sharing, and the integration with CrowdStrike Falcon® Next-Gen SIEM. The partnership also offers cyber risk quantification and visualization through Zscaler Risk360™, which pulls in detailed incident, asset, and vulnerability data from CrowdStrike.
Zscaler recently reported impressive financial results for the fourth fiscal quarter of 2024, with revenues surpassing consensus estimates by over 4% and earnings per share reaching $0.88. Despite a challenging macroeconomic climate, Zscaler maintained a solid growth trajectory, showing a 30% year-over-year increase in revenue and a 27% surge in billings. Bernstein, a financial research firm, adjusted its price target for Zscaler shares to $238.00 but maintained an Outperform rating.
However, Zscaler's fiscal 2025 revenue and profit forecasts fell short of Wall Street predictions. Despite this, Wedbush reiterated its 'outperform' rating on Zscaler, expressing confidence in the company's future.
InvestingPro Insights
As Baird maintains a positive outlook on Zscaler (NASDAQ:ZS), highlighting the company's strategic initiatives and competitive advantages, recent data and insights from InvestingPro further enrich the narrative surrounding Zscaler's market position and financial health. According to InvestingPro, Zscaler holds more cash than debt on its balance sheet, which could provide the company with a solid foundation to navigate market uncertainties and invest in growth opportunities. Moreover, the company's gross profit margin is notably high at 78.08%, reflecting its ability to maintain profitability at the core operational level.
From a market perspective, Zscaler's market capitalization stands at $26.07 billion, with a significant revenue growth of 34.07% over the last twelve months as of Q4 2024. This growth trajectory aligns with Baird's observations regarding the company's potential to accelerate its annual recurring revenue. However, it's worth noting that Zscaler is trading at a high Price / Book multiple of 20.46, which may suggest a premium valuation compared to its tangible assets.
For investors considering Zscaler's prospects, it's important to note that analysts predict the company will become profitable this year, as per one of the InvestingPro Tips. This aligns with Baird's positive rating and could be a pivotal point for the company's financial performance. For those looking for a deeper dive into Zscaler's financials and future outlook, InvestingPro offers additional tips and insights to guide investment decisions.
To explore further analysis and get more InvestingPro Tips on Zscaler, interested readers can visit https://www.investing.com/pro/ZS, which includes a total of 11 tips for a comprehensive understanding of the company's financial and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.