Baird Lowers Price Target for Zscaler, But Maintains Outperform Rating - InvestingPro Insights
Baird, a renowned investment firm, has adjusted its outlook on Zscaler, a leading provider of cloud-based security solutions. The firm's analyst has revised the price target for Zscaler to $225, down from the previous target of $260. Despite this adjustment, Baird continues to hold an Outperform rating on the company's shares.
Zscaler recently reported earnings that surpassed expectations; however, the stock saw a decline in after-hours trading due to cautious guidance for first-half billings. The guidance indicates a flat to slightly lower year-over-year productivity in the first half, with an improvement expected in the second half as new representatives reach full productivity.
The analyst highlighted that non-cancellable billings may impact first-half billings negatively, but a significant acceleration is projected for the second half. Zscaler's emerging products, particularly its AI-powered security solutions, are gaining traction and now represent over 20% of new business.
The analyst emphasized Zscaler's robust cloud infrastructure, resilience, and data advantage as key strengths aligned with long-term trends towards zero-trust security models. Despite the revised price target, Baird's Outperform rating reflects confidence in Zscaler's future success.
In other news, Zscaler reported a 30% year-over-year revenue increase and a record free cash flow margin of 27%, exceeding expectations. However, the company's FY 2025 outlook met but did not exceed expectations for revenue and billings growth of 19.5% and 20.5% respectively.
Various analyst firms have maintained neutral ratings on Zscaler, adjusting price targets based on recent developments. Collaborations with Google and NVIDIA to enhance security measures and integrate advanced AI technologies have been recognized as significant.
InvestingPro Insights: Zscaler's strong financial health and market performance are highlighted with a gross profit margin of 77.94% and a year-over-year revenue growth of 37.16%. Analysts are optimistic about the company's prospects, anticipating growth in net income and sales. Zscaler's liquidity position surpasses short-term obligations, indicating a solid financial foundation.
Despite not turning a profit in the last twelve months, analysts predict profitability this year. Zscaler's return of 21.98% over the past year demonstrates investor confidence. For a detailed analysis, InvestingPro offers additional tips on Zscaler for deeper insights into the company's performance and potential.
In conclusion, Zscaler's positive outlook, strong financials, and strategic partnerships position the company for continued growth and success in the cybersecurity market. Investors should consider the company's potential for long-term returns and monitor developments in the evolving security landscape.