Piper Sandler Raises Zscaler (ZS) Price Target by 15.8% on Strong Start to FY 2024

Piper Sandler's Rob Owens raised their price target on Zscaler (NASDAQ: ZS) by 15.8% from $190 to $220 on 2023/11/28. The analyst maintained their Strong Buy rating on the stock.

In a review of Zscaler's Q1 2024 earnings results, released on November 27, Owens highlighted the company's solid start to the fiscal year. Owens stated, "Beats on top and bottom line metrics marked a solid start to FY 2024 for Zscaler." The company reported earnings per share (EPS) of $0.67, surpassing the Zacks Consensus Estimate of $0.49 by 131% and showing a significant improvement from Q1 2023's $0.29. Additionally, Zscaler reported revenue of $496.7 million, exceeding the Zacks Consensus Estimate of $473.41 million and representing a 39.7% increase from Q1 2023's $355.55 million.

Owens pointed out that Zscaler achieved a record annual contract value for its Federal segment, while its broader platform offerings continued to gain traction. This positive momentum supports the company's growth trajectory going forward. Owens also mentioned that Zscaler's ability to execute on the longer-term SASE (Secure Access Service Edge) opportunity remains strong, with broader platform momentum rapidly emerging.

The analyst reiterated that Zscaler's billings guidance took into account elevated uncertainty, as the company appointed a new Chief Revenue Officer (CRO) and Chief Marketing Officer (CMO) during the quarter. Despite this, Owens remains bullish on Zscaler's prospects.

Looking ahead, Zscaler's management provided guidance for Q2 2024, including an EPS range of $0.57 to $0.58 and revenue projections of $505 million to $507 million. For the full fiscal year 2024, the company expects EPS between $2.45 and $2.48, with revenue in the range of $2.09 billion to $2.1 billion. Zscaler also anticipates operating income of $360 million to $365 million for FY 2024.

Chairman and CEO Jay Chaudhry expressed satisfaction with the company's strong start to the fiscal year, emphasizing Zscaler's role in enabling enterprises to pursue transformative initiatives such as Zero Trust and AI. Chaudhry highlighted the growing demand for Zscaler's Zero Trust Exchange and the company's efforts to scale its go-to-market and R&D organizations to meet this demand.

In addition to Piper Sandler's analyst, other analysts also updated their ratings and price targets for Zscaler on November 28, 2023. Hamza Fodderwala from Morgan Stanley raised their price target by 5.9%, from $170 to $180, while maintaining a Hold rating on the stock. Jonathan Ruykhaver from Cantor Fitzgerald increased their price target by 8.8%, from $170 to $185, also maintaining a Hold rating. Shaul Eyal from TD Cowen raised their price target by 10.3%, from $195 to $215, and maintained a Buy rating on the stock.

According to data from WallStreetZen, 80.8% of top-rated analysts currently rate Zscaler as a Strong Buy or Buy, while 19.2% consider it a Hold. No analysts recommend or strongly recommend selling the stock.

Zscaler's stock has performed well year-over-year, with a 40.4% increase. During the same period, the S&P 500 has risen by 14.9%.

Piper Sandler analyst Rob Owens, who raised the price target on Zscaler, is ranked in the top 1% out of 4,414 Wall Street analysts by WallStreetZen. Owens specializes in the Technology sector and boasts an average return of 24.7% and a win rate of 63.7%.

Zscaler, Inc. is a global cloud security company that offers solutions for secure access to externally managed applications, including software-as-a-service (SaaS) applications and internet destinations. The company also provides workload segmentation solutions to reduce risk and ensure compliance. Zscaler serves various industries, including airlines and transportation, consumer goods and retail, healthcare, technology, and telecommunications.

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