Zscaler Inc (NASDAQ:ZS) shares tanked in early trading on Tuesday, even after the company reported upbeat fiscal first-quarter results.
The company reported its results amid an exciting earnings season. Here are some key analyst takeaways.
- Scotiabank analyst Patrick Colville reaffirmed a Sector Outperform rating, while raising the price target from $195 to $205.
- JMP Securities analyst Trevor Walsh maintained a Market Outperform rating, while lowering the price target from $270 to $240.
- BMO Capital Markets analyst Keith Bachman reiterated an Outperform rating, while raising the price target from $197 to $222.
- Oppenheimer analyst Ittai Kidron reiterated an Outperform Buy rating, while lifting the price target from $230 to $250.
- RBC Capital Markets analyst Matthew Hedberg an Outperform rating and a price target of $230.
- Stifel analyst Adam Borg reiterated a Buy rating and price target of $235.
- Needham analyst Mike Cikos initiated coverage of Zscaler with a Buy rating and price target of $240.
- Guggenheim Securities analyst John DiFucci maintained a Neutral rating on the stock.
Check out other analyst stock ratings.
Scotiabank: Zscaler's billings rose 13% year-on-year in the fiscal first quarter. The fiscal 2025 guidance was “no doubt an underwhelming start to the year," Colville said. CFO Remo Canessa's retirement "will add more uncertainty on Zscaler's commitment to its F25 billings target," he added.
The company's profitability in the first quarter was healthy, suggesting "plenty of room to beat and raise through the remainder of the fiscal year," the analyst stated. "While Zscaler is undoubtedly a tough story to love right now, we continue to wholeheartedly believe in our medium-term thesis, that Zscaler is a leader in SASE, a market which is far from saturated," he further wrote.
JMP Securities: Zscaler's quarterly results were healthy "across all guided metrics," Walsh said. Non-GAAP earnings of 77 cents per share came in higher than consensus of 63 cents, while revenues of $628.0 million were ahead of consensus of $606.1 million, he added.
The company's full-year revenue guidance reflects 21% growth, versus 26% year-on-year growth reported for the fiscal first quarter. Canessa’s retiring after eight years with the company overshadows the quarterly results, Walsh added.
BMO Capital Markets: Zscaler delivered a modest billings beat for the quarter. The company also raised its full-year guide by the amount of the billings beat. Billings growth of 13% year-on-year marks a deceleration from the previous quarter's 27% growth, with a decline in new and upsell billings.
The company reported RPO of $4.41 billion, with 26% year-on-year growth, Bachman said. The retirement of Canessa, 67, seems "appropriate and understandable.”
Oppenheimer: Zscaler's results were "solid" and better than expected, driven by "growing customer demand for emerging products and large-customer activity," Kidron said. "Mgmt. also highlighted improved sales productivity and lower attrition, supporting improved pipeline generation and customer engagement.”
The analyst expressed optimism around Zscaler making a strong recovery in the back half of fiscal 2025 and momentum building in fiscal 2026, "as the sales motion matures and emerging products drive expansion."
Investors could still adopt a "wait-and-see approach." Guidance for the rest of the year remains unchanged. But the CFO transition causes "added uncertainty," he further wrote.
RBC Capital Markets: Zscaler delivered a beat "across the board" that flowed through to the raised guidance, Hedberg said. The results were highlighted by 26% revenue growth 13% billings growth, he added.
The midpoint of the full-year revenue guidance suggests 21.5% growth, while that of billings points to 19.6% growth.
Stifel: Zscaler's quarterly results reflected ongoing demand for the company's "broadening zero-trust portfolio,' Borg said. Elevated expectations exerted pressure on the stock, he added.
Shares traded lower on the news of Canessa’s retirement. "We think shares likely trade sideways until investors get more confidence in the F2H25 ramp/new CFO," Borg further wrote.
Needham: Zscaler outperformed expectations in the quarter. Upside to billings is being driven by "20%-plus yr-yr growth in Unscheduled Billings (composed of New, Upsell, & Renewal Billings)," Cikos said in the initiation note.
Management raised the full-year guidance only by the first-quarter beat, which is "in keeping with Zscaler’s typical prudence in guidance-setting," the analyst stated. This suggests that the company is likely to outperform over the remainder of the year, he added.
"We believe continued improvement in attrition, alongside go-to-market efforts can help Zscaler deliver further outperformance through FY25, particularly as new products gain traction," Cikos further wrote.
Guggenheim Securities: There was "significant moderation in business momentum," with billings growth decelerating to 13%, "which was halved from the 27% in the previous quarter," DiFucci said.
The company could achieve 19% billings growth in the first half of the year, provided new and renewal contracts of the last two years "are automatically billed (assuming 3-year deals)," the analyst stated. This could be followed by 25% growth in the second half, he added.
Price Action: Shares of Zscaler had declined by 4.10% to $199.96 at the time of publication on Tuesday.
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