Zscaler gets new buy rating at Stifel, firm sees 35% upside
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Zscaler (NASDAQ:ZS) is getting some positive commentary from Wall Street, as Stifel started coverage on the IT security provider with a buy rating and a $335 price target, implying 35% gains from current levels.
Analyst Adam Borg noted that Zscaler has "significantly broadened" its platform, offering cloud-delivered security options, as well as secure access to internal apps and improving the end-user experience for its customers, differentiating itself with its multi-tenant cloud platform.
"With increasingly hybrid environments (on-prem/cloud, work-from-anywhere) as the new normal, along with a heightened cybersecurity threat landscape, we expect organizations to continue embracing modern cloud-delivered security as traditional network-based approaches become increasingly insufficient," Borg wrote in a note to clients. "Given this, we
believe Zscaler is well-positioned to sustain 30%+ growth in coming years, and that its premium valuation is warranted."
Zscaler (ZS) shares are down fractionally in pre-market trading to $250.
Borg added that with apps migrating to the cloud and employees working from anywhere, Zscaler's (ZS) cloud-based security options lets users connect with the app themselves and "minimizes the attack surface, reduces lateral movement,eliminates the backhauling of traffic (reducing latency), and supports zero trust principles."
The company has also boosted its platform and "significantly expanded," offering options that let it go after a $72 billion addressable market. Even though it has had some early success, Zscaler (ZS) has "plenty of opportunity" to drive new growth and add for existing customers as it looks to generate $5 billion in annual recurring revenue over the next several years.
Borg noted that cybersecurity could be thought of as a big data problem, suited for cloud delivery and with Zscaler operating at "massive scale," processing over 200 billion transactions a day, it could have the opportunity to look at over 300 trillion daily signals that "helps create a virtuous feedback loop that further refines Zscalerâs algorithms to better detect zero-day malware and improve user and application anomaly detection."
Earlier this week, Zscaler (ZS) was upgraded at Morgan Stanley, as the investment firm said the IT security company can accelerate revenue growth this year, citing "a strong pipeline of larger deals in [2022]."