On Monday, Morgan Stanley (NYSE:MS) maintained an Equalweight rating on Zscaler (NASDAQ:ZS) while raising its price target to $215 from the previous $202. The adjustment comes as the firm anticipates favorable outcomes for the company's fourth fiscal quarter results.
Zscaler is heading into its fiscal fourth quarter with expectations that are achievable, according to Morgan Stanley. The firm's analysis suggests that demand remains strong and the company's competitive position is stable. This outlook is set against a backdrop of cautious investor sentiment, which the firm believes may be overly conservative.
The analyst noted that while changes within Zscaler's sales organization could be disruptive through fiscal year 2025, the current consensus forecasts seem modest. This suggests that there is room for the company to outperform market expectations without needing to make significant adjustments to its business strategy or operations.
Morgan Stanley's stance reflects a careful optimism for Zscaler's near-term performance, particularly in light of the company's forthcoming fiscal quarter results. The raised price target is indicative of the potential that the firm sees in Zscaler's stock, given the current market conditions and internal company dynamics.
The report concludes with an outlook that leans slightly positive for Zscaler ahead of the company's fourth fiscal quarter results. Morgan Stanley's analysis points to a set of beatable estimates, which could lead to a favorable reaction in the stock market if the company meets or exceeds these projections.
In other recent news, Zscaler, a leading cloud-based information security company, has been the focus of several analyst notes following its impressive financial performance.
Barclays (LON:BARC) raised its price target for the company to $230, maintaining an Overweight stance while Mizuho Securities downgraded the stock from Outperform to Neutral, citing potential market shifts. Notably, Zscaler reported its first GAAP profitability, with a 30% year-over-year increase in billings and a record operating margin. Furthermore, the company saw a 31% year-over-year growth in customers with an annual recurring revenue of over $1 million.
TD Cowen maintained a Buy rating for Zscaler, highlighting the company's strategic growth through organic development and acquisitions. Piper Sandler also expressed confidence in the company's market positioning and strategic initiatives, maintaining its Overweight rating.
In addition to these developments, Zscaler announced expanded collaborations with Google (NASDAQ:GOOGL) and NVIDIA (NASDAQ:NVDA), aiming to enhance Zero Trust security measures and integrate advanced AI technologies, respectively.
InvestingPro Insights
As Zscaler (NASDAQ:ZS) approaches its fiscal fourth quarter, the company's financial health and market performance are of keen interest to investors. According to real-time data from InvestingPro, Zscaler boasts a robust gross profit margin of approximately 77.94% over the last twelve months as of Q3 2024, highlighting the company's efficiency in managing its cost of goods sold relative to its revenue. Additionally, the company has experienced a significant year-over-year revenue growth of 37.16%, suggesting that its market presence and demand for its services are expanding.
An InvestingPro Tip notes that Zscaler is expected to become profitable this year, aligning with Morgan Stanley's positive outlook on the company's ability to outperform market expectations. Another tip points out Zscaler's impressive gross profit margins, which supports the firm's view of the company's stable competitive position. Interestingly, while Zscaler is trading at a high Price / Book multiple of 27.58, indicating a premium valuation, analysts anticipate sales growth in the current year, which could justify such valuation metrics.
For investors seeking a deeper analysis, there are additional InvestingPro Tips available at InvestingPro for Zscaler, which provide further insights into the company's financial health and market potential.
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