Zscaler's Market-Leading Position in Zero Trust Initiatives, Impressive AI Integration: Analysts Take on Future Growth

Needham analyst Alex Henderson reiterates Zscaler Inc ZS with a Strong Buy and a $210 price target.

Zscaler held their annual Zenith Live event in Las Vegas and drew a standing-room-only crowd in a massive Aria Hotel Ballroom. 

Henderson talked to numerous partners, CIOs, CISOs, and other attendees and came away increasingly confident in the sustainability, robust growth, and competitive position of Zscaler. 

The conference, not surprisingly, focused on the integration of AI and the ability of Zscaler to capture comprehensive and differentiated data across the entire operational footprint of an organization. 

The rich dataset captures structured, unstructured, URL and Network level data, telemetry information, and cross-references with Application Layer and user-specific data. Zscaler laid out a handful of new products and capabilities to drive new solutions for customers and new Revenue.

The analyst is impressed by the substantial increase in integration of Zscaler's platform with the shift left technologies into the coder community and integration, particularly with Hashi's Terraform product. 

JMP Securities analyst Trevor Walsh reiterates Zscaler with a Market Outperform and a $225 price target.

The briefing reviewed new feature releases extending the efficacy of the Zero Trust Exchange Platform and new solutions (Risk360, Zero Trust Branch Connector, Zscaler ITDR solution, and ZSLogin feature) and capabilities unleashing the power of generative AI (Data Protection for AI, AITotal, AI Visibility, and Access Control, Security Autopilot, Zscaler Navigator, and Multi-Modal DLP), all after the stock is up 39.8% YTD vs. the Nasdaq's 31.8%.

Some notable data points include: 1) a Fortune 500 pharmaceuticals company "just signed a big deal with Zscaler in the last two weeks [and] went big with the modules"; and 2) Zscaler will have an agent for Cloud Native Application Protection Platforms (CNAPP). Plus, it wants to leverage the agent for the data protection component. 

The analyst continues to like the name for:

• An experienced management team under the passionate leadership of CEO and Co-Founder Jay Chaudhry, with an emphatic vision to deploy all ZS product pillars.
• Demonstrated success as a modern network security platform play.
• General tailwinds around Zero Trust initiatives and Zscaler's market-leading position across a variety of segments.

Walsh maintained his FY23 non-GAAP EPS estimate of $1.63 (consensus $1.63) on revenue growth of 46%, FY24 non-GAAP EPS estimate of $2.26 (consensus $2.11) on revenue growth of 32%, and FY25 non-GAAP EPS estimate of $2.63 (consensus $2.72) on revenue growth of 24%.

Price Action: ZS shares traded lower by 3.98% at $147.88 on the last check Tuesday.