Zscaler's Strong Q1 2024 Results Reinforce Confidence in Growth Story

Stephens & Co.'s Brian Colley raised their price target on Zscaler (NASDAQ: ZS) by 12.5% from $200 to $225 on 2023/11/28. The analyst maintained their Strong Buy rating on the stock.

Zscaler, a leading cloud security company, reported strong Q1 2024 results that exceeded market expectations. The company's earnings per share (EPS) of $0.67 beat the Zacks Consensus Estimate of $0.49 by a significant margin, representing a 131% increase compared to Q1 2023. Additionally, Zscaler's revenue of $496.7 million surpassed the Zacks Consensus Estimate of $473.41 million, marking a 39.7% year-over-year increase.

Despite these impressive numbers, Zscaler's stock declined by 4.32% following the earnings announcement. This drop was attributed to the size of the billings beat and weaker-than-expected guidance provided by management. However, analysts, including Brian Colley, believe that Zscaler's management execution remains solid, and the company is benefiting from the increasing adoption of Secure Service Edge (SSE)/Secure Access Service Edge (SASE) and Zero Trust principles.

According to Colley, Zscaler's Q1 2024 report "reinforced confidence in the durability of the company's secular growth story." The analyst's positive outlook is supported by Zscaler's strong financial position, with cash, cash equivalents, and short-term investments totaling $2.32 billion.

Looking ahead, Zscaler's management provided guidance for Q2 2024 and the fiscal year 2024. For Q2 2024, the company expects an EPS in the range of $0.57 to $0.58 and revenue between $505 million and $507 million. In terms of operating income, Zscaler anticipates $84 million to $86 million. For the full fiscal year 2024, Zscaler projects an EPS of $2.45 to $2.48, revenue of $2.09 billion to $2.1 billion, and operating income between $360 million and $365 million.

Chairman & CEO Jay Chaudhry expressed satisfaction with the company's Q1 performance, stating, "We had a strong start to our fiscal year with all key metrics coming above our guidance. We are enabling enterprises to move forward with their key transformative initiatives - Zero Trust and AI - which is driving demand for our Zero Trust Exchange."

Several 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% to $180 and maintained a Hold rating on the stock. Jonathan Ruykhaver from Cantor Fitzgerald increased their price target by 8.8% to $185, also maintaining a Hold rating. Shaul Eyal from TD Cowen raised their price target by 10.3% to $215 and maintained a Buy rating.

Currently, 80.8% of top-rated analysts consider Zscaler a Strong Buy or Buy, while the remaining 19.2% see it as a Hold. No analysts recommend or strongly recommend selling the stock.

Zscaler has outperformed the broader market, with its stock up 40.4% year-over-year, surpassing the S&P 500's gain of 14.9%.

Stephens & Co. analyst Brian Colley, who raised Zscaler's price target, is ranked in the top 14% of Wall Street analysts by WallStreetZen. With an average return of 11.7% and a 60% win rate, Colley specializes in the Technology sector.

Zscaler, Inc., headquartered in San Jose, California, operates as a global cloud security company. Its solutions, including Zscaler Internet Access and Zscaler Private Access, provide secure access to applications and help measure end-to-end user experience across business applications. The company also offers workload segmentation solutions to reduce risk and ensure compliance with industry benchmarks.

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