What Happened:
Shares of cloud security platform Zscaler (NASDAQ:ZS) jumped 5.02% in the afternoon session after analyst Gray Powell of BTIG upgraded the stock's rating from Neutral to Buy with a price target of $185. The price target implied a potential 20% upside from where shares were traded when the report was released. Powell added that recent field checks on Zscaler's SSE (Secure Service Edge) showed sustained improvement, and significant projects that were delayed in the past are now progressing once more. After the initial pop the shares cooled down to $154.88, down 0.15% from previous close.
What is the market telling us:
Zscaler's shares are very volatile and over the last year have had 42 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. The previous big move was 3 months ago, when the stock gained 16.5% on the news that the company pre-announced an impressive "beat and raise" quarter. Preliminary third-quarter results exceeded analysts' revenue, and operating income estimates. In addition, management raised full-year guidance for revenue, calculated billings, and operating income. Founder and CEO, Jay Chaudhry, added to the optimism, stating that "the high ROI of adopting the Zscaler Zero Trust Exchange platform continues to resonate with customers and prospects in this challenging macro environment."
Zscaler is up 40.6% since the beginning of the year, but at $154.88 per share it is still trading 20% below its 52-week high of $193.60 from September 2022. Investors who bought $1,000 worth of Zscaler's shares 5 years ago would now be looking at an investment worth $3,760.
Is now the time to buy Zscaler? Access our full analysis of the earnings results here, it's free.