Zscaler jumps after Q3 beat, guidance boost, as analysts call it 'pillar of strength'
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Zscaler (NASDAQ:ZS) shares jumped on Friday after the cloud security company posted strong third-quarter results on Thursday and raised its full-year guidance, prompting some analysts to call it a "pillar of strength" in the current market environment.
Wedbush Securities analyst Dan Ives maintained his outperform rating on Zscaler (ZS), noting that it had continued "robust growth," with an "impressive" 54% rise in billings.
"Underlying deal metrics point to the continued acceleration of cyber security cloud momentum for [Zscaler] for the remainder of 2022 and beyond which will be highlighted by the Street given the challenging macroeconomic headwinds facing the overall market/pockets of tech spending," Ives wrote in a note to clients.
Ives lowered the per-share price target to $200 from $330, citing a lower earnings multiple.
Zscaler (ZS) shares rose more than 3.5% to $147.51 in premarket trading on Friday.
For the period ending April 30, Zscaler (ZS) said it earned an adjusted $0.17 per share on $286.81M in revenue, up 62.6% year-over-year.
Looking ahead, it expects fourth-quarter revenue to be between $304M and $306M, compared to estimates of $291.3M. It also boosted full-year revenue guidance to be between $1.078B, up from a prior outlook of $1.045B to $1.05B.
The forecast for adjusted operating income and adjusted earnings per share were also raised, with operating income expected to be between $106M and $108M, up from a prior outlook of $95M to $98M. Adjusted earnings are now forecast to be between $0.64 and $0.65, compared to a previous view of $0.54 to $0.56.
Citi analyst Fatima Boolani kept her buy rating on Zscaler (ZS), noting that the underlying business is "solid" and though some have expressed worries about a deceleration in growth, it's not an issue, as she raised estimates "across the board."
Boolani also noted that more than 80% of revenue for the next 12 months is "in the bag," when looking at current revenue performance obligations, which should provide downside protection, "especially if a meaningful economic downturn materializes."
Boolani lowered her price target to $225 from $295, noting a lower earnings multiple, citing "the backdrop of sector valuation compression."
Earlier this month, Wedbush Securities listed Zscaler (ZS) as one of the "haves" in a tech sector of "haves and have nots."
Analysts have been bullish on Zscaler's stock (ZS). Before Zscaler announced its results and its stock jumped, it had an average rating of Buy from Wall Street analysts, and a less enthusiastic Buy from Seeking Alpha authors. In contrast, Seeking Alpha's quant system, which consistently beats the market, rated Zscaler a Hold.