Scotiabank has made an adjustment to the price target of Zscaler shares (NASDAQ: NASDAQ:ZS), bringing it down to $195.00 from the previous target of $210.00.
The firm has kept its Sector Outperform rating for the cloud security company. This change follows Zscaler's fourth-quarter financial results, which surpassed key metrics but presented an unexpected billing guidance for fiscal year 2025 that puzzled investors.
The company's management has forecasted a billing performance heavily weighted towards the third and fourth quarters, which introduces additional risk into the Zscaler investment narrative.
Despite this, Scotiabank reaffirmed its positive stance on Zscaler, citing the company's enduring market leadership in cloud security.
The analyst pointed to Microsoft (NASDAQ:MSFT)'s new Secure Access Service Edge (SASE) offering, noting its high price point and predicting minimal impact on Zscaler's enterprise win rates and sales cycles.
The SASE market is seen as far from being fully tapped, and Scotiabank anticipates that its growth will continue to exceed expectations in the coming year.
Zscaler's profitability in relation to its growth in the fourth quarter was highlighted as one of the best in the software sector. The analyst appreciates the aspect of Zscaler's performance, emphasizing the company's efficiency.
In other recent news, Zscaler reported earnings that exceeded expectations, with a 30% year-over-year revenue increase and a record free cash flow margin of 27%. However, the company's guidance for the first half of fiscal year 2025 indicates a projected slowdown in billings growth, prompting Baird to lower its price target for Zscaler to $225, while maintaining an Outperform rating.
Rosenblatt and Cantor Fitzgerald also retained their Neutral ratings, adjusting their price targets to $190 and $170 respectively.
In addition, Mizuho Securities reduced its price target to $195, citing concerns about Zscaler's forward-looking projections and recent personnel changes. UBS, despite reducing its price target to $250, maintains a Buy rating on the stock, expressing positivity about Zscaler's core business.
Zscaler's collaborations with Google (NASDAQ:GOOGL) and NVIDIA (NASDAQ:NVDA) to enhance security measures and integrate advanced AI technologies have been noted as significant.
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