Skip to main content

Market Overview

Barclays: Zscaler's Q3 Numbers 'Speak For Themselves,' But Bullish Stance Can't Be Justified

Barclays: Zscaler's Q3 Numbers 'Speak For Themselves,' But Bullish Stance Can't Be Justified

Zscaler Inc (NASDAQ: ZS), a cloud security provider, reported Wednesday afternoon with third-quarter numbers that "speak for themselves," but investors shouldn't be aggressive on the stock, according to Barclays.

The Analyst

Barclays' Saket Kalia maintains an Equal Weight rating on Zscaler's stock with an unchanged $36 price target.

The Thesis

Zscaler showed accelerating billings growth in its Q3 report that likely carried over into the fourth quarter, Kalia said in a research report.

Calculated billings in the quarter came in at $54.7 million, which not only marks an acceleration to 73 percent from one year ago, but beat the analyst's estimate of $43.5 million. The billings beat is attributed to more contracts that paid multiple years upfront rather than annually.

Even excluding these multiyear upfront payments, billings still would have accelerated to 60-percent growth, which reaffirms the company's momentum and market share gains in secure web gateway and cloud sandboxing, Kalia said. 

Zscaler's stock already reflects the company's ability to satisfy the growing "mega trend" in cloud security, the analyst said.

Even when assuming a 35-percent growth rate in fiscal 2019 and 2020, a $36 price target is justified based on a 13x multiple and implies minimal upside from Thursday morning's trading action.

Nevertheless, Zscaler faces several upcoming potential catalysts for the stock, including the move to Office 365, SD-WAN requiring networking transformation, and the company's annual user conference June 26-27 that could feature product-related news.

Price Action

Shares of Zscaler were trading higher by more than 23 percent Thursday morning.

Related Links:

Symantec's Internal Investigation: The Sell-Side Reacts

Wall Street Weighs In On Zscaler As Analyst Quiet Period Expires

Latest Ratings for ZS

Apr 2021MizuhoInitiates Coverage OnBuy
Mar 2021Truist SecuritiesUpgradesHoldBuy
Mar 2021BerenbergUpgradesHoldBuy

View More Analyst Ratings for ZS
View the Latest Analyst Ratings


Related Articles (ZS)

View Comments and Join the Discussion!

Posted-In: Barclays cloudAnalyst Color Earnings News Price Target Reiteration Analyst Ratings Best of Benzinga

Latest Ratings

GIKColliers SecuritiesInitiates Coverage On14.0
SANWLake StreetInitiates Coverage On6.0
LILAMorgan StanleyDowngrades15.0
BEJP MorganUpgrades36.0
NEXACredit SuisseUpgrades11.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at