Zscaler Soars on Analysts' Earnings Praise

Zscaler  (ZS) - Get Report was up sharply Thursday as analysts heaped praise on the cloud-based network security platform after the company beat Wall Street's fiscal first-quarter earnings expectations and raised its guidance. 

Shares of the San Jose, Calif.-based company were jumping 11.04% to $164.40 in pre-market trading.

Wedbush analyst Daniel Ives, who rates the company outperform, boosted his price target to $185 from $175, saying he believes Zscaler "looks to be in the driver's seat on the cloud cyber security shift over the next decade."

Zscaler reported non-GAAP net income of $20 million, or 14 cents a share, compared with $4.9 million, or 4 cents a share, in the year-earlier quarter. Revenue totaled $142.6 million, up 52% from a year earlier.

'With strong execution and massive cloud tailwinds which have been accelerated in this COVID environment, ZS is helping drive cyber security transformative trends for enterprises across the board," Ives said.

Morgan Stanley analyst Keith Weiss likewise raised his price target on Zscaler shares to to $150 from $123, saying the quarter showed “accelerating momentum into 2021,” with billings growth and free-cash-flow margins both ahead of expectations.

"While Zscaler has proved to be a significant WFH (work from home) beneficiary in 2020," said Weiss, who rates the stock equal-weight, "we think the heavy investments in sales capacity, a revamped go-to market and secular tailwinds around Cloud Security and Zero Trust Architectures should drive continued outperformance in billings heading into the next calendar year."

BMO Capital Markets analyst Keith Bachman, who rates the stock market perform, raised his price target to to $195 from $170, saying Zscaler "has meaningful incremental share opportunities, and thus we think growth rates are durable."

"We believe that Zscaler’s cloud security platform continues to gain significant market share in the SWG [secure web gateway] business, driven by a large opportunity to migrate to cloud-based services," Bachman said. "Further, we think Zscaler can disrupt the broader network security market and significant share gains would likely drive much higher estimates."