Mizuho Securities has adjusted its outlook on Zscaler (NASDAQ:ZS) shares, reducing the price target to $210 from the previous $220 while retaining a Neutral stance on the stock. The adjustment follows observations that suggest Zscaler is securing a solid portion of market transactions, which is expected to contribute to a strong fiscal fourth quarter.
The firm's stance stems from a mid-July assessment, where the possibility was highlighted that Zscaler could sustain its momentum through what is typically a robust fiscal fourth quarter in July. Recent checks have been largely positive, showing Zscaler's competitive performance in winning deals.
Despite the promising quarter, Mizuho expresses caution regarding the first half of fiscal year 2025. The firm's analysts anticipate potential shifts in the market that could impact Zscaler's performance. This outlook has led to a slight decrease in the price target.
Zscaler marked its first instance of GAAP profitability, with a 30% year-over-year increase in billings and a record operating margin. Zscaler also reported a 31% year-over-year growth in customers with an annual recurring revenue of over $1 million.
Amid these developments, Piper Sandler maintained its Overweight rating on Zscaler, while Mizuho Securities downgraded Zscaler's stock from Outperform to Neutral, citing concerns over execution risks and leadership changes. TD (TSX:TD) Cowen, BofA Securities, and Scotiabank (TSX:BNS) have maintained positive outlooks on Zscaler, with price targets ranging from $208 to $270. Zscaler also announced expanded collaborations with Google (NASDAQ:GOOGL) and NVIDIA (NASDAQ:NVDA), aimed at enhancing Zero Trust security measures and integrating advanced AI technologies.
InvestingPro Insights
Recent data from InvestingPro shows that Zscaler, with a market capitalization of $26.08 billion, has demonstrated a robust revenue growth of 37.16% over the last twelve months as of Q3 2024. This aligns with Mizuho Securities' observation of the company securing a solid portion of market transactions. Additionally, Zscaler's gross profit margin stands impressively at 77.94%, underscoring the company's ability to maintain profitability in its operations.
InvestingPro Tips for Zscaler highlight that analysts expect net income and sales growth in the current year, which could be indicative of the strong fiscal fourth quarter Mizuho anticipates. However, with the stock trading at a high revenue valuation multiple of 23.86 and having fared poorly over the last month with a price total return of -14.54%, investors may exhibit caution. On a more positive note, Zscaler operates with a moderate level of debt and has liquid assets that exceed short-term obligations, suggesting financial stability.
For those interested in a deeper dive, there are additional InvestingPro Tips available, which provide a comprehensive analysis of Zscaler's financial health and market position. These insights can be found at https://www.investing.com/pro/ZS, offering valuable information for investors weighing the near-term optimism against the cautious long-term outlook presented by Mizuho Securities.
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