On Friday, Oppenheimer adjusted its outlook on Zscaler (NASDAQ: NASDAQ:ZS), reducing the price target on the company's shares to $260 from the previous $290. The firm maintained an Outperform rating on the stock.
The revision follows Zscaler's third-quarter fiscal year 2024 earnings release, which showcased strong performance, including a beat on estimates fueled by robust demand and effective execution.
Zscaler's financial report highlighted the successful uptake of its user bundle offerings—Zscaler Internet Access (ZIA), Zscaler Private Access (ZPA), and Zscaler Digital Experience (ZDX).
The company also reported significant growth in its customer base, with increases in both the number of clients providing over $100,000 and over $1 million in Annual Recurring Revenue (ARR).
Despite a challenging macroeconomic environment and higher sales attrition, competition remained stable, and the Federal vertical showed notable strength.
The company's guidance for the fourth quarter of FY24 and the outlook for FY25 were described as conservative by Oppenheimer, factoring in the new Chief Revenue Officer's influence and a more modest close rate assumption. This conservative stance, according to the firm, sets the stage for potential positive outcomes.
Furthermore, Oppenheimer expressed confidence in Zscaler's position within the cybersecurity landscape, citing its technological leadership in zero trust security solutions.
The firm anticipates that Zscaler's ability to capitalize on its market opportunity and further penetrate with its emerging products remains strong.
The price target adjustment to $260 reflects broader software industry trends, particularly multiple compression, rather than a change in the fundamental view of the company's performance or prospects.
InvestingPro Insights
Amidst the analysis of Zscaler's (NASDAQ: ZS) performance and future outlook, recent data from InvestingPro provides additional context for investors considering the company's stock. Zscaler holds more cash than debt on its balance sheet, which is a positive sign of the company's financial health. Furthermore, analysts are optimistic about the company's future, predicting net income growth this year and highlighting impressive gross profit margins. The company's strong gross profit margin of 77.55% in the last twelve months as of Q2 2024 underlines its efficiency in managing costs relative to revenue.
InvestingPro data reveals a significant 40.62% revenue growth for Zscaler during the same period, reinforcing the robust demand for its cybersecurity solutions. Despite this growth, the stock has experienced a downturn, with a 35.26% decline in the 3-month price total return. This may attract investors looking for potential rebound opportunities, especially considering that the stock is currently trading at 60.34% of its 52-week high, which could indicate room for recovery.
Those interested in deeper analysis can uncover even more InvestingPro Tips for Zscaler, with a total of 15 tips available that may further inform investment decisions. To gain access to these additional insights and optimize investment strategies, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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