Here's Why Wells Fargo Continues To Recommend Zscaler As A 'Top Pick'

Wells Fargo analyst Andrew Nowinski recently had the opportunity to travel with Zscaler, Inc ZS management and came away with a better understanding of the importance of improving channel dynamics.
Traditional resellers like Optiv and system integrators like Accenture plc ACN were more engaged with the company and were originating more deals than just fulfilling orders.
He believes these changes will drive long-term growth.
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Management also reiterated their commitment to expanding the operating margin and will increase focus on profitability if the macro worsens.
Based on last week's commentary from channel partners at the CrowdStrike Holdings, Inc CRWD event, he believes overall demand could improve relative to June/July trends.
If demand has improved, Zscaler's billings and revenue guidance for 1Q23 could prove conservative.
As such, he reiterated an Overweight rating and $225 price target and continues to recommend ZS as a top pick.
His price target multiple is a premium to the peer group average of 12.4x, but higher long-term growth assumptions justify it.
Analysts had bumped Zscaler's price targets after it reported better-than-expected Q4 results and issued sales guidance above estimates.
Price Action: ZS shares traded higher by 1.27% at $160.71 on the last check Monday.

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