Zscaler Positioned As A Top Beneficiary In Rapidly Evolving Security Landscape, Says Piper Sandler Analyst

Piper Sandler analyst Rob Owens upgraded the shares of Zscaler Inc ZS from Neutral to Overweight and raised the price target from $160 to $190.

The analyst believes the transition to next-generation network security architectures remains nascent, with recent COVID-related increases in remote/hybrid work only serving to galvanize the beginnings of a sizable market.

With Gartner forecasts calling for about 30% CAGR over the next 3 years to reach approximately $16 billion in spend, the opportunity for sustained growth over the coming years from the core ZIA + ZPA proposition remains significant, said the analyst.

With SASE in early stages of adoption and ZS remaining a top beneficiary of further adoption, the analyst expects this core growth driver to remain durable for the company over the coming years.

Beyond core network security, the analyst thinks Zscaler has incremental avenues to help sustain growth and drive scale over the coming years.

With data protection and workload security both attacking some of the most exciting areas of security in the analyst’s view, they will continue to add to the durable growth for ZS in the coming years.

The analyst suggested that strong growth prospects coupled with ramping margins add to the compelling set-up for ZS in 4Q and the coming year.

Following two years of upside to billings guidance moderating, the analyst sees probable scenarios for this upside to be inline / slightly better than what was seen during FY23.

Price Action: ZS shares are trading higher by 4.3% at $162.31 on the last check Monday.