Shares of Zscaler (ZS) gained ground on Monday after Morgan Stanley’s four-star-rated analyst Meta Marshall upgraded the cybersecurity firm to Buy ahead of its upcoming Q4 earnings report. Marshall also raised her price target on ZS stock from $280 to $320, predicting around 15% upside from current levels. ZS stock was up more than 2% in pre-market trading on Tuesday at the time of writing.
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For context, Zscaler is an IT security company that helps enterprises protect users, applications, and data. The company is scheduled to release its Q4 earnings on September 2 after market close. Analysts forecast earnings of $0.80 per share, marking a 9.1% decline from the same quarter last year. Meanwhile, revenue is expected to grow 19.2% year-over-year to $706.94 million, underscoring strong demand and top-line growth.
Morgan Stanley Upgrades ZS to Buy
Just ahead of the Q4 release, Marshall turned bullish on ZS stock. Her upgrade emphasized the growing role of secure access service edge (SASE) technology, which helps businesses apply the same security standards whether users are working in the office or remotely in the cloud.
She also cited Gartner’s forecast that enterprise adoption of SASE will grow sharply from just 14% currently to 47% by 2027, making it a major growth driver for cybersecurity providers.
Within this context, Marshall believes Zscaler is well-positioned to benefit. She stated that the company’s strong leadership in zero-trust security gives it an opportunity to expand into a broader security platform and capture more customer spending, especially as cybersecurity risks rise and artificial intelligence makes the risk landscape more complex.
Marshall further noted that Zscaler’s purchase of Red Canary strengthens its AI security capabilities and opens the door to the fast-growing managed detection and response (MDR) market. She added that despite ZS stock’s sharp gains this year, its valuation still offers upside potential if the company continues to outperform peers on growth and margins.
Is ZS a Good Stock to Buy?
Overall, analysts have a Strong Buy consensus rating on ZS stock based on 23 Buys, five Holds, and zero Sells assigned in the past three months. Meanwhile, the average ZS price target of $324.36 per share implies 17.08% upside potential.
