B. Riley Upgrades Zscaler to Buy Amid AI Tailwinds
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 3 days ago
0mins
Source: seekingalpha
- Rating Upgrade: B. Riley upgraded Zscaler's rating from Neutral to Buy, primarily due to its expanding product line and AI tailwinds, although the price target was lowered from $275 to $225, reflecting a decrease in software valuation multiples, indicating sustained market confidence in the company.
- Strong Market Demand: Analyst Erik Suppiger noted that demand for secure network access remains robust, and the adoption of AI technology will provide a tailwind for Zscaler, with expectations that the company will benefit from an expanding product portfolio, further solidifying its leadership in the secure cloud access market.
- Distinct Competitive Advantages: Despite a crowded competitive landscape, Suppiger believes Zscaler can maintain its technology leadership due to its unique technological advantages and the operation of its private cloud network, with AI adoption expected to accelerate demand for secure cloud access and other services, projecting nearly 20% year-over-year organic growth.
- Investor Sentiment Recovery: The analyst pointed out that Zscaler's stock has fallen over 50% since last November, partly due to investor concerns about AI displacing SaaS vendors, but the company's core attributes make it less susceptible to AI displacement, suggesting strong growth potential ahead.
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Analyst Views on ZS
Wall Street analysts forecast ZS stock price to rise
30 Analyst Rating
24 Buy
6 Hold
0 Sell
Strong Buy
Current: 174.450
Low
260.00
Averages
325.62
High
390.00
Current: 174.450
Low
260.00
Averages
325.62
High
390.00
About ZS
Zscaler, Inc. is a cloud security company. The Company has developed a platform incorporating core security functionalities needed to enable fast and secure access to cloud resources based on identity, context and an organization’s policies. Its Zscaler Zero Trust Exchange platform protects thousands of customers from cyberattacks and data loss by securely connecting users, devices, and applications in any location. Its solution is a purpose-built, multi-tenant, distributed cloud platform that incorporates the security functionality needed to enable users, applications, and devices to safely and efficiently utilize authorized applications and services based on an organization’s business policies. It delivers its solutions using a software-as-a-service (SaaS) business model and sells subscriptions to customers to access its cloud platform, together with related support services. It offers a security platform that combines its platform with automated security operations.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Strategic Importance: CEO Jay Chaudhry emphasized that traditional access governance methods based on users and directories cannot scale to millions of AI agents, thus partnering with Symmetry Systems will enable Zscaler to create an access graph mapping how every identity, application, and data source connects within the enterprise.
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- Strategic Importance: CEO Jay Chaudhry emphasized that traditional access governance methods based on users and directories cannot scale to millions of AI agents, thus partnering with Symmetry Systems will enable Zscaler to create an access graph mapping how every identity, application, and data source connects within the enterprise.
- Zero Trust Framework: This foundational visibility will support Zscaler's Zero Trust Exchange, allowing governance of agent-to-application and agent-to-agent communications at scale, providing customers with the actionable control necessary to safely embrace AI.
- Market Reaction: Despite the acquisition announcement, Zscaler's shares fell 0.8% in premarket trading, indicating that the market's initial response to the news may not be entirely positive.
See More
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- Acquisition Intent: Zscaler has announced its intent to acquire Symmetry Systems, with the transaction expected to close in the coming days, aimed at enhancing foundational visibility for governing AI agent communication and advancing the next phase of Zero Trust architecture.
- Enhanced Visibility: CEO Jay Chaudhry stated that the acquisition will add an access graph that maps how every identity, application, and data source connects across the enterprise, providing customers with the actionable control needed to safely embrace AI.
- Market Reaction: In pre-market trading on Nasdaq, Zscaler shares fell by 1.19% to $172.37, reflecting a cautious market sentiment regarding the acquisition and its potential impact on future growth expectations.
- Strategic Implications: By integrating Symmetry Systems' technology, Zscaler will be able to govern communication between AI agents and applications at scale, further solidifying its leadership position in cybersecurity and enhancing customer trust in its Zero Trust solutions.
See More
Stock Price Fluctuations of Multiple Companies
- Layoff Impact: Intuit announced a workforce reduction of about 3,000 employees, or 17% of its total staff, leading to a more than 3% drop in stock price, indicating urgent cost control measures that may affect its market competitiveness.
- Financial Guidance Reaffirmed: Hasbro reaffirmed its full-year adjusted EBITDA guidance of $1.40 billion to $1.45 billion, slightly below the market consensus of $1.44 billion, with shares dropping over 8%, reflecting market concerns about its profitability.
- Shareholder Confidence Boost: AMC Entertainment's stock surged 13% after CEO Adam Aron disclosed the purchase of 250,000 shares valued at approximately $344,000, demonstrating management's confidence in the company's future, potentially attracting more investor interest.
- Earnings Beat: Toll Brothers reported second-quarter earnings of $2.72 per share, exceeding analyst expectations of $2.57, with shares rising nearly 8%, indicating strong performance and growth potential in the real estate market.
See More
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- Toll Brothers Strong Performance: Toll Brothers reported fiscal second-quarter earnings of $2.72 per share, surpassing the $2.57 expected by analysts, with revenue of $2.51 billion also exceeding the forecast of $2.42 billion, leading to a 3% increase in stock price, reflecting market confidence in its performance.
- Target's Optimistic Sales Outlook: Target reported first-quarter earnings of $1.71 per share on revenue of $25.44 billion, both exceeding analyst expectations, resulting in a nearly 2% stock price increase, and the company raised its full-year sales outlook, indicating confidence in future growth.
- Cava Guidance Upgrade: Cava raised its full-year adjusted EBITDA guidance to between $181 million and $191 million, with shares jumping nearly 7%, while first-quarter earnings of 20 cents per share and $438 million in revenue also beat expectations, showcasing strong market performance.
See More
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- Stock Performance: Companies like Workday, ServiceNow, and Salesforce saw their shares increase between 3.7% and 4.3%, while cybersecurity firms such as CrowdStrike and Zscaler gained between 1.2% and 2.5%, reflecting a renewed confidence among investors in the software sector.
- Analyst Rating Divergence: Analysts at BofA Global Research rated ServiceNow as a
See More
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- Strategic Collaboration Expansion: Zscaler has launched Project AI-Guardian in collaboration with Global System Integrators (GSIs) to integrate its 'Zero Trust Everywhere' framework, enabling enterprises to accelerate innovation in an AI-driven environment while ensuring data security and compliance.
- AI Risk Management: The initiative will leverage Zscaler's AI Protect portfolio to provide AI asset management, access controls, and secure infrastructure, helping organizations identify and mitigate AI-related risks, thereby maintaining competitiveness in a rapidly evolving market.
- Frontier AI Threat Response: Zscaler's newly launched Security Review and Resiliency Engagement Program aims to provide enterprises with immediate threat modeling and defense measures to counter AI-driven automated attacks, ensuring security against emerging risks.
- Partner Support: Multiple GSI partners, including Cognizant, EY, HCL, and Infosys, will drive the AI-Guardian initiative, utilizing their expertise to deliver comprehensive AI security solutions that enhance enterprises' risk management capabilities.
See More
