Zscaler, Palo Alto, Microsoft poised to breakthrough 'trough' in security spending: MS
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Investment firm Morgan Stanley said on Friday that even though its latest checks into cybersecurity spending suggests a bottoming may be near, companies such as Zscaler (NASDAQ:ZS), Palo Alto Networks (NASDAQ:PANW) and Microsoft (NASDAQ:MSFT) should still be able to breakthrough the "trough" in spending.
"Our latest checks and [Value Added Reseller] survey suggest security demand is nearing a trough after a weaker [first-half]," analyst Hamza Fodderwala wrote in an investor note. "Overall, new bookings should improve by [the fourth-quarter] on easier comps and likely stronger budget flush vs last year."
Fodderwala, who slightly tweaked his price target on Zscaler (ZS), moving to $155 from $145, added that the company should benefit from stronger public demand in the third-quarter. Palo Alto Networks (PANW) should also benefit, Fodderwala added, with healthcare and financial services also seeing strength or stability.
Microsoft (MSFT) is gaining share across multiple categories, including Identity, XDR, Endpoint and security information and event management, while also benefiting from vendor consolidation, Fodderwala said.
"Customers are more concerned about vendor lock-in/concentration, but this has yet to negatively impact demand, based on our checks," he explained. "The upcoming launch of Security Co-pilot is driving incremental interest and should drive capture some spend next year." 
Conversely, the survey showed more cautious spending out of Europe after "relative resilience" earlier in the year, along with weakness in retail, tech and telecom spending, which could negatively impact Fortinet (FTNT), Okta (OKTA), CheckPoint (CHKP) and CrowdStrike (CRWD).

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