Zscaler stock falls as BTIG downgrades on limited upside
solarseven


Zscaler (NASDAQ:ZS) stock fell as much as 8% on Tuesday after BTIG Research downgraded its rating to Neutral from Buy, citing limited upside to its shares and signs of a potential slowdown.
BTIG does not issue price targets on Neutral-rated stocks.
"With ZS trading at 13.4x 2023E EV/sales vs the median security company at 7x, we think risk/reward favors a Neutral rating," said analyst Gray Powell.
"... independent field checks on ZS remained mostly positive in Q2. However, they downticked from prior quarters and lead us to believe sales cycles will elongate over the next 6-12 months," he added.
Powell expects magnitude of upside surprises will moderate and ZS' growth will decelerate from 54% in Q3 into the low 40% range in H2 of FY23. But he still expects strong Q4 results.
Truist Securities cut its PT on ZS to $250 from $275, citing uncertainty in intermediate-term outlook. The new PT implies potential upside of 60.2% to its last close.
Analyst Joel Fishbein maintained ZS' Buy rating as he believes it is well-positioned for long-term growth given underpenetrated market opportunity and long-term secular tailwinds of digital transformation, cloud security, and Zero Trust architecture.
SA Authors on average rated ZS Buy, in-line with bullish sell-side ratings (20 Strong Buy, 7 Buy, 4 Hold).
But SA Quant's rating on ZS is Hold as it scored very poorly in factor grades valuation and momentum.

ZS stock declined ~52% YTD.