Zscaler Stock Poised to Rise on Strong Earnings, Guidance

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Zscaler Stock Poised to Rise on Strong Earnings, Guidance
Credit: © Reuters.

by Daniel Shvartsman

Investing.com - Zscaler’s stock (NASDAQ: ZS ) is poised to open higher after the cyber-security software provider posted an earnings beat.

Zscaler reported $230.5M in revenue for their quarter ended October 31, 62% above last year’s numbers. Non-GAAP income came in at $.14/share. Both were ahead of analyst estimates.

CEO and Chairman Jay Chaudhry said, “CISOs and CIOs are looking to phase out legacy network security in favor of zero trust architecture, due to increasing cyber and ransomware risks and accelerating digital transformation. This architecture shift continues to drive strong demand for our Zero Trust Exchange platform.” He also reported the company crossed the $1B annual recurring revenue (ARR) mark, with a focus on reaching $5B over time.

Zscaler shares are trading up 6% pre-market at $368/share, and investors may be looking at both the guidance and the billings numbers as promising signs for the security provider. Billings were up 71% year over year, ahead of revenue. Zscaler’s guidance for Q2 2022 (their fiscal year runs August-July) is for $240-242M revenue and $.11/share non-GAAP net income. They raised full-year guidance to $1B in revenue and $1.3B in billings, from $930-950M and $1.23-1.25B previously. Current analyst expectations for Q2 are for revenue of $225M.

Morgan Stanley and JMP Securities both raised their price targets on Zscaler in response to the report, to $330 and $400/share respectively. Morgan Stanley has Zscaler as equal weight, while JMP Securities has them as a buy.

Crowdstrike (NASDAQ: CRWD ) is up 2%, perhaps in sympathy, though that high-flying security stock has come down 25% from 52-week highs on valuation concerns.

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