Mizuho Initiates Zscaler Stock At Buy: Here's Why

Zscaler Inc ZS seems poised to benefit in an “increasingly digital-enabled world” due to its unique cloud proxy security architecture, according to Mizuho Securities.

The Zscaler Analyst: Gregg Moskowitz initiated coverage of Zscaler with a Buy rating and a price target of $217.

The Zscaler Thesis: The company has significant monetization opportunities as its newer offerings, like ZDX and ZCP, gain traction, Moskowitz said in the initiation note.

“We believe ZS is a next-gen cybersecurity pioneer, and its unique and highly scalable cloud security architecture is enabling organizations to more securely access their critical applications and data. ZS has driven robust billings growth of 51% and 41% in FY19-20, respectively, and we project a three-year CAGR of ~33% through FY23E (although this will likely prove conservative),” the analyst wrote.

“We highlight several key secular trends and events that are serving as a tailwind for ZS’s growth prospects today and/or in the future. This includes digital transformation, Secure Access Service Edge (SASE)/Zero Trust, 5G infrastructure buildouts, and the recent SolarStorm cyberattack,” he added.

Moskowitz further mentioned that the company’s cross-selling and upselling are also strengthening.

“Despite a premium valuation, ZS is very well-positioned within cloud security, and we see healthy upside as the co. grows into its opportunity,” he said.

ZS Price Action: Shares of Zscaler had risen by 2.89% to $196.83 at the time of publication Tuesday.

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