On Wednesday, Zscaler (NASDAQ:ZS), a leader in cloud security, received an updated price target from Needham, a notable investment firm. The new target is set at $235.00, decreased from the previous figure of $290.00. Despite this reduction, Needham has maintained a Strong Buy rating on the company's shares.
Zscaler reported robust financial results for the fourth fiscal quarter, with billings growing by 27% year-over-year to $910.8 million, surpassing the consensus estimates by $18 million or 2%. Additionally, the company's revenue saw a 30% increase to $592.9 million, beating expectations by 4.5%.
The company's initial fiscal year 2025 billings guidance was provided in line with expectations but indicated a heavier weighting towards the second half of the year. The guidance anticipates approximately 13% growth in billings for the first half, with an expected acceleration to low-20% growth in the second half. This projection is supported by a record pipeline and robust upsell and cross-sell activities, along with the benefit of pre-existing contracts contributing to billings.
Zscaler's initial revenue growth forecast for fiscal year 2025 suggests an increase of 20%-21%, which is slightly below the consensus. However, the company experienced lower than expected attrition in the fourth quarter and has ramped up hiring in anticipation of improved productivity throughout the fiscal year, which is anticipated to support the acceleration in the second half.
In summary, Needham's revised price target reflects a cautious yet optimistic outlook on Zscaler's future performance, considering the company's strong end to the fiscal year and expectations for continued growth and operational improvement in the coming year.
In other recent news, Zscaler, the cloud security firm, reported strong fourth-quarter financial results, surpassing key metrics yet presenting an unexpected billing guidance for fiscal year 2025. The earnings report showed a 30% year-over-year revenue increase and a record free cash flow margin of 27%.
However, the company's forecast for the first half of fiscal year 2025 indicates a projected slowdown in billings growth. This has prompted several analyst firms to adjust their price targets. Scotiabank, Baird, Rosenblatt, Mizuho Securities, and Cantor Fitzgerald have all maintained their ratings but lowered their price targets for Zscaler.
Despite the cautious forecast, these firms expressed confidence in Zscaler's long-term market position and growth potential. Additionally, 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.
InvestingPro Insights
As Zscaler (NASDAQ:ZS) navigates a landscape of growth and valuation adjustments, real-time data from InvestingPro provides a snapshot of the company's financial health and market performance. Analysts are optimistic about Zscaler's prospects, forecasting an uptick in net income and sales growth in the current year. This aligns with the company's robust financial results and the strong guidance provided for the upcoming fiscal periods. With a gross profit margin of approximately 77.94% in the last twelve months as of Q3 2024, Zscaler showcases its ability to maintain impressive profitability in its operations.
InvestingPro Tips highlight that Zscaler's liquid assets exceed its short-term obligations, indicating a solid liquidity position. Moreover, the company operates with a moderate level of debt, which may provide flexibility for future investments and growth strategies. In terms of market performance, Zscaler has experienced a strong return over the last month, with a price total return of 13.96%, emphasizing the positive market sentiment towards the company.
However, it's worth noting that Zscaler is trading at high valuation multiples, with a Price / Book multiple of 26.71 as of the last twelve months ending Q3 2024. This could suggest that the market has high expectations for the company's future growth. Investors interested in a deeper dive into Zscaler's performance can find additional InvestingPro Tips, with 11 more detailed insights available, highlighting various aspects of the company's financial and market behavior.
For those considering an investment in Zscaler, the InvestingPro platform offers a comprehensive set of tools and analytics, including a fair value estimation of $191.63, which can help investors make informed decisions based on the latest data and expert analysis.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.