On Thursday, Bernstein, a financial research firm, adjusted its price target for Zscaler (NASDAQ:ZS) shares, a company listed on NASDAQ:ZS. The new price target is set at $238.00, reduced from the previous target of $270.00. Despite this change, Bernstein continues to hold an Outperform rating for the cybersecurity company's stock.
Zscaler's financial results for the fourth fiscal quarter of 2024 showed revenues exceeding consensus estimates by more than 4%, marking a more significant beat than the 3%+ surpluses of the previous two quarters. The company's report also indicated positive developments in its sales transformation efforts, as evidenced by an increase in incremental revenue growth for the first time after three quarters.
The company's management addressed inquiries about the possibility of deals being accelerated into the fourth quarter, denying that the current strength could imply potential weaknesses in subsequent quarters. Additionally, Zscaler highlighted the growing impact of its broader product platform on new business, which now accounts for 22% of the total in FY 2024. Expectations are set for this contribution to expand further in FY 2025.
Bernstein's revised price target reflects their analysis of Zscaler's recent performance and future prospects. Despite the reduction, the Outperform rating suggests that Bernstein views Zscaler's stock as likely to perform better than the overall market or its sector in the foreseeable future.
In other recent news, Zscaler, a cybersecurity firm, reported significant growth in its fiscal fourth quarter of 2024. The company showcased an 11% increase in revenue quarter over quarter, with total revenue reaching $592.0 million, surpassing both the company's and analysts' expectations. Earnings per share also exceeded forecasts, coming in at $0.88, which was attributed to strong demand for zero trust security and new AI-powered innovations.
Despite a challenging macroeconomic climate, Zscaler managed to maintain a solid growth trajectory, with a 30% year-over-year increase in revenue and a 27% surge in billings. The company also achieved a significant milestone, surpassing $2.5 billion in annual recurring revenue and reaching $1 billion in quarterly bookings. The firm's focus on expanding its platform to include workload, IoT, and OT protection met strong customer demand, contributing to a net revenue retention rate of 115%.
However, Zscaler's fiscal 2025 revenue and profit forecasts fell short of Wall Street predictions, resulting in a sharp decline in the company's stock. Despite this, Wedbush reiterated its 'outperform' rating on Zscaler, expressing confidence in the company and suggesting that the current weakness in the stock presents a buying opportunity. These recent developments indicate a continued focus on growth and innovation by Zscaler.
InvestingPro Insights
As investors digest the latest price target adjustment from Bernstein, real-time data and insights from InvestingPro can provide additional context. Zscaler, with a market capitalization of $23.75 billion, is trading at a high Price / Book multiple of 18.64, which could signal a premium valuation compared to industry peers. Despite recent volatility, with the stock experiencing a significant drop of over 20% in the last week, the company's strong gross profit margin of nearly 78% over the last twelve months as of Q4 2024 underscores its efficiency in generating earnings relative to revenue.
Moreover, two InvestingPro Tips highlight key aspects of Zscaler's financial health and future outlook. Firstly, Zscaler holds more cash than debt on its balance sheet, providing financial flexibility and potentially reducing risk for investors. Secondly, analysts predict the company will be profitable this year, which, coupled with the expected net income growth, could offer a positive trajectory for the stock. For those seeking a more comprehensive analysis, there are 32 additional InvestingPro Tips available, offering a deeper dive into Zscaler's performance and projections.
The enriched perspective provided by these insights can help investors make more informed decisions as they consider Zscaler's potential in their portfolios. With the next earnings date on November 27, 2024, market participants will be keenly watching for further developments that may influence the stock's trajectory.
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