- Cloud security business beats quarterly billings estimates
- Stock surges in after-hours trading
- Analyst remain largely optimistic on stock
The mood around cloud security firm Zscaler (ZS:NASDAQ) has darkened considerably this year as investors fretted over the potential impact of an economic downswing and rising competitive threats might exert on growth.
Yet those fears now look overcooked after the Silicon Valley firm’s fiscal third quarter results surpassed expectations and led to an improved forecast for the full year to 31 July 2024.
Zscaler reported billings of $628 million, marking a 30% year-on-year increase, and beyond Wall Street estimates of $584 million. The company also demonstrated a significant overperformance in operating income and free cash flow compared to Street estimates.
Zscaler stock, which had lost more than 26% year-to-date, rallied hard in after hours trading and is poised to open later today up 17% at $183.50.
Updated guidance for fiscal 2024 suggests billings could hit $2,604.5 million, reflecting near-30% growth year-on-year. This forecast is an uptick from the Street’s previous consensus projection of $2,561 million.
UPBEAT ‘STREET’
Analysts remain largely optimistic on the company’s prospects, with Bank of America, Barclays, BTIG and Bernstein all reaffirming their client recommendations to buy for the long run.
Yet they remain shy of euphoric, with several trimming price targets on the stock. BTIG’s analysts cut theirs from $258 to $220, while Goldman Sachs clipped its projection from $215 to $189.
Bank of America was more upbeat maintaining its $265 target and pointing out that approximately half of year-on-year growth for the quarter came from new customers, signaling that Zscaler is continuing to build momentum.
Ahead of earnings, Zscaler had 31 buy ratings, 11 holds, and zero sell recommendations among Wall Street analysts.
