Market Overview

BTIG Downgrades Zscaler On Valuation, Says Company Is Redefining Cybersecurity Market

BTIG Downgrades Zscaler On Valuation, Says Company Is Redefining Cybersecurity Market

Zscaler, Inc. (NASDAQ: ZS) shares are exhibiting balanced near-term risk-reward after a "successful" IPO earlier this year, according to BTIG.

The Analyst

BTIG analyst Joel P. Fishbein Jr. downgraded Zscaler from Buy to Neutral.

The Thesis

Zscaler shares have risen over 60 percent since the company’s IPO and 10 percent since the fourth-quarter print last week, Fishbein said in the Monday downgrade note. (See his track record here.) 

The analyst said he's moving to the sidelines in anticipation of a better entry point, adding that Zscaler will be a leading vendor in next-generation cybersecurity. 

Zscaler is redefining the $100-billion security market and disrupting a broken cybersecurity model, Fishbein said

“[The fourth quarter of 2018] closed on a strong note with deals sizing upward and becoming more strategic, evidenced by an enterprise ARR mix now sitting in the low $300,000 range," the analyst said. "Zscaler is seeing great traction with its transformational bundles, with transformational deals now representing 35 percent of ARR, up from 20 percent at the time of the IPO." 

Security valuations are generally sky high, and Zscaler is no exception, Fishbein said.

“High barriers to entry, [a] first-mover advantage and the potential to disrupt several large security markets open up a multiyear path to sustained growth. Yet, with shares currently trading at 16.9x our FY20E base case revenue estimate, we feel that risk-reward is balanced." 

Price Action

Zscaler shares were down 0.76 percent at $45.70 at the time of publication Monday afternoon. 

Related Links:

Wall Street Weighs In On Zscaler As Analyst Quiet Period Expires

Infographic: A Journey To The Cloud

Latest Ratings for ZS

Mar 2019UBSMaintainsNeutralNeutral
Mar 2019Deutsche BankMaintainsHoldHold
Mar 2019BarclaysMaintainsEqual-WeightEqual-Weight

View More Analyst Ratings for ZS
View the Latest Analyst Ratings

Posted-In: btig cloud Cybersecurity Joel P. Fishbein Jr. softwareAnalyst Color Downgrades Analyst Ratings Best of Benzinga


Related Articles (ZS)

View Comments and Join the Discussion!

Latest Ratings

PLXSSidoti & Co.Initiates Coverage On0.0
TIFBank of AmericaReiterates104.0
MOBank of AmericaReiterates66.0
FDXBank of AmericaReiterates188.0
AUPHRaymond JamesMaintains11.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Trader Essentials
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.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

BofA Upgrades Sanofi, Names 3 Growth Drivers For Pharma Stock

Opinion: Lenders Are Repeating Recession-Era Mistakes