Analysts See Zscaler Benefiting From Economic Slowdown, Cloud Transition Post Q3 Beat

  • Analysts expressed the reasons behind their optimism on Zscaler, Inc ZS post Q3 beat.
  • Needham analyst Alex Henderson maintained a Strong Buy rating on Zscaler and set a price target of $185.
  • Zscaler delivered a strong Q3, easily beating street estimates, and guided well ahead of Street forecasts for the July quarter. 
  • RPO growth of 83%, Revenue growth of 63%, and Free Cash Flow equal to 15% of Revenues showed the overall strength of the operations. 
  • Zscaler believes it's seeing an acceleration in its pipeline and is benefiting from slower economic conditions and customer cost pressures. 
  • Zscaler helps companies lower complexity, streamline Security, consolidate vendors, accelerate transitions to the cloud, and improve cloud security while improving user experiences. 
  • As a result, customers see Zscaler as an answer to the question: "How can I improve my Security while continuing to move to the Cloud to improve my agility even as my budget tightens?"
  • Credit Suisse analyst maintained Zscaler with an Outperform and lowered the price target from $410 to $310.
  • Quarterly results reinforce that Zscaler, as the flagbearer of cloud security with a differentiated architecture, is uniquely positioned to help drive transformational change toward Zero Trust security architectures. 
  • Despite concerns of a COVID-driven pull-forward, the analyst believes 2022 will be defined by businesses moving forward on multi-year, "strategic" cloud-first transformation roadmaps. 
  • As organizations increasingly focus on these large-scale architectural shifts, the analyst believes a meaningful runway exists for Zscaler.
  • Price Action: ZS shares traded higher by 11.88% at $159.00 on the last check Friday.
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