On Friday, Scotiabank (TSX:BNS) maintained its positive stance on Zscaler, Inc. (NASDAQ:ZS), reiterating its Sector Outperform rating and a price target of $210.00. The endorsement follows observations and feedback gathered at Zscaler's 2024 Zenith Live user conference in Las Vegas, where the bank's analyst had the chance to interact with over ten customers and partners of the cybersecurity firm.
The feedback pointed to Zscaler's continued leadership in the secure service edge space, with products like Zscaler Internet Access (ZIA) and Zscaler Private Access (ZPA) considered essential by users. Additionally, there was no indication of a shift in the competitive landscape according to the gathered insights. While the response to emerging products was mixed, Zscaler's ZDX and Zero Trust SD-WAN solutions are reportedly drawing increasing interest.
Zscaler's Chief Revenue Officer, Mike Rich, provided analysts with an update on the company’s new go-to-market strategy. This strategy is particularly relevant against the backdrop of investor concerns regarding potential sales attrition and its impact on the company's performance. Scotiabank's analysis suggests that the Secure Access Service Edge (SASE) market is still in its formative stages, countering the narrative of competition bears.
The bank's report highlighted that Zscaler's stock presents an attractive risk-reward proposition at current levels. However, for Zscaler to firmly establish itself as a top investment choice, Scotiabank anticipates the need for a more rapid adoption of the company's emerging products, a trend which the bank notes cannot yet be confidently predicted.
In other recent news, Zscaler, a cloud security company, has made several key strides. The company's Q3 results exceeded expectations, reporting a 30% year-over-year increase in billings and a record operating margin, marking its first instance of GAAP profitability. Zscaler's Dollar-Based Net Retention rate remained robust, indicating strong upsell activities, which contributed to a 31% year-over-year growth in customers with an annual recurring revenue of over $1 million.
Zscaler has also expanded collaborations with Google (NASDAQ:GOOGL) and NVIDIA (NASDAQ:NVDA). The partnership with Google aims to enhance Zero Trust security measures, providing improved threat and data protection for enterprise users. In conjunction with NVIDIA, Zscaler plans to integrate advanced AI technologies to bolster its cybersecurity services.
Several analyst firms have responded to these developments. BMO (TSX:BMO) Capital Markets maintained its Outperform rating on Zscaler with a steady price target of $208.00. Piper Sandler confirmed its Overweight rating on Zscaler with a steady price target of $255.00, underscoring the company's strategic growth. Canaccord Genuity (TSX:CF) adjusted its price target for Zscaler to $220, maintaining a Buy rating, while Evercore ISI also adjusted the price target for Zscaler shares to $245. TD (TSX:TD) Cowen maintained a Buy rating with a steady price target of $270.00, highlighting the company's 32% revenue growth.
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