On Friday, Baird lowered its price target on Zscaler shares (NASDAQ:) to $260 from the previous $265, while maintaining an Outperform rating on the stock. The adjustment comes ahead of the company’s third-quarter fiscal year 2024 earnings report, scheduled for release on May 30, 2024.
The analyst cited a sharp negative turn in sentiment due to competitive concerns, particularly regarding Palo Alto Networks (NASDAQ:)’ platform strategy, and disruptions in the go-to-market (GTM) strategy.
Despite these challenges, the analyst noted that Zscaler is expected to surpass the low bar of expectations for the upcoming report. This anticipation is supported by strong feedback from channel partners and the company’s Federal and State, Local, and Education (SLED) business sectors.
Zscaler’s recent announcements regarding AI-driven data protection, including advanced threat prevention, were highlighted as factors that bolster the company’s competitive edge. Even with ongoing skepticism around the implied fourth-quarter guidance amid the competitive and GTM headwinds, the analyst believes that Zscaler’s valuation is appealing, with the stock trading at approximately 9 times its expected FY25 enterprise value to sales.
The report also mentioned positive feedback on Zscaler’s positioning within the Thunderdome program and a strategic revamp of its GTM approach, suggesting a promising trajectory for the company. The analyst’s commentary reflects a belief in Zscaler’s potential to navigate the current market challenges and emerge with a strong performance.
InvestingPro Insights
As we approach Zscaler’s (NASDAQ:ZS) upcoming earnings report, a peek into real-time data from InvestingPro provides a deeper financial context. The company’s market capitalization stands at a robust $25.76 billion, reflecting significant investor interest. Despite not having turned a profit over the last twelve months, Zscaler boasts an impressive gross profit margin of 77.55%, indicating strong operational efficiency in generating revenue. Moreover, the company’s revenue has experienced a healthy growth of 40.62% in the same period, underscoring its expanding market presence.
InvestingPro Tips highlight that Zscaler holds more cash than debt on its balance sheet and has liquid assets that exceed short-term obligations, providing financial stability and flexibility. Additionally, analysts predict that Zscaler will be profitable this year, which could be a pivotal turn for the company’s financial health. For investors seeking further insights, there are 12 additional InvestingPro Tips available, offering a comprehensive view of Zscaler’s financial and market position.
For those considering an investment in Zscaler, leveraging these insights could be beneficial. To access a full suite of analysis and tips, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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