AI-Driven Risk360 Fuels Zscaler's Market Dominance: Analyst Highlights Strong Buy Rating And $210 Target Price

Needham analyst Alex Henderson reiterated a Strong Buy rating on Zscaler, Inc. ZS, with a price target of $210.

The analyst remains upbeat on the company's robust pipeline, which should help drive growth in 2H23 and into 1H24.

The analyst notes that Zscaler received positive feedback on its new features and products, particularly the AI-driven Risk360.

Henderson thinks Zscaler's multi-tenancy architecture gives it a significant network effect in aggregating data for AI engines. 

The analyst adds that current prices represent a substantial investment opportunity and believe investors will be rewarded for buying and holding onto these shares.

Management notes that the company's architecture sees the full range of contextual information from the Network layer to the Application layers and from edge to cloud, Henderson adds.

Zscaler noted that it is seeing a solid reception to its Data Protection capabilities with existing and new customers, leveraging its AI skills and Zero Trust policies that deliver best-in-class Data Security.

The analyst notes that Zscaler is growing 50% faster than closest competitor Palo Alto Networks, Inc. PANW.

The analyst adds that ZS's growth is estimated at 35% in CY23 and 27% in CY24. Zscaler is driving margins more than Palo, with EPS growth estimated at roughly 2x that of Palo, growing CY23 by 40% and 17% in CY24.

Overall, ZS is a unique investment vehicle with exceptional long-term value potential. 

Price Action: ZS shares are trading higher by 6.12% to $151.94 on the last check Monday.