- Shares of Zscaler jumped 21% after the increase.
- ZS shares are now down just 1% year-to-date.
- CEO Jay Chaudhry raised the revenue estimate by 5%.
- Fiscal year forecasts increased by $30 million.
Zscaler (ZS)The company, known for its zero-trust cloud architecture and competitive cybersecurity offerings, saw its shares rise on Monday after the company surprised the market by raising its fiscal third-quarter outlook. Zscaler doesn’t even release its quarterly results until June 3rd — that’s more than three weeks away. Shares of ZS rose 21% to more than $108 in Monday morning’s regular session.
A number of other major cyber security companies followed. Palo Alto Networks (PANW) at the same time, shares rose by 3%. CrowdStrike (CRWD) jumped 6%. Fortinet (FTNT) it also rose more than 6% last Friday on earnings beat and outlook upgrades. Wall Street is starting to believe that cybersecurity is the safest part of the growth stock matrix. This price action began despite all three major indexes falling between 0.05% and 0.2% on Monday. The S&P 500 is outperforming the NASDAQ, meaning value is outperforming growth even as cybersecurity firms grow.
Zscaler Stock News: Q3 Revenue Estimate Raised 5%
Zscaler’s management raised its third-quarter revenue estimates from a mid-point of $397 million to a mid-point of $417 million, or slightly more than 5%. They also raised their forecast for adjusted profit from operations to $62 million from a median of $55.5 million. CEO Jay Chaudhry now thinks billings for the quarter will rise nearly 40% year over year to $480 million.
Chaudhry now thinks fiscal 2023 revenue will come in about $30 million higher than previously, in a range between $1.587 billion and $1.591 billion.
“Our preliminary third quarter results exceeded the upper end of our guidance range,” Chaudhry said in a statement. “We finished the quarter well as the strong return on investment from the adoption of the Zscaler Zero Trust Exchange platform continues to resonate with customers and prospects. in this challenging macro environment.”
Shares of Zscaler were down more than 20% year-to-date before Monday’s rally. At the time of writing, the stock has lost just 1% year-to-date. Despite the welcome increase in the share price, however, the ZS share price has fallen by 43% over the past year. Because of high growth rates and praise from analysts, stocks have soared to impressive heights during the pandemic.
In early April, Needham analyst Alex Henderson was undeterred by the fluctuating stock price. While Zscaler was trading around $105, Henderson said Zscaler will double its operating margin and grow revenue by 30%+ over the long term. Henderson gave the stock a 100% upside with his price target of $210.
Zscaler stock forecast
Well, I can’t say I’ll see $210 in the next twelve months, but Zscaler stock certainly looks like it’s poised for more growth. A close above the March 31 swing high at $117.78 will confirm that the trend is in place. Meanwhile, Zscaler stock could see a consolidation as short traders take their profits off the table.
However, this consolidation will allow the Relative Strength Index (RSI) to fall back into neutral territory, allowing for the next phase of the rally. After all, the RSI jumped from 31 to 61 just in Monday’s session. It will quickly hit 70, overbought territory, and then require some side action to cool down.
After the consolidation, expect institutional investors to jump back in and push ZS stock back to $135 and $142.50 — both resistance points earlier in the year.
ZS daily chart
