Bank of America Securities analyst Tal Liani reiterated a Buy rating on Zscaler today and set a price target of $340.00.
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Tal Liani has given his Buy rating due to a combination of factors including Zscaler’s strong financial performance and promising growth prospects. The company’s recent results showed impressive billings and revenue growth, surpassing market expectations. This growth is driven by strategic initiatives in AI security, Zero Trust, and data security, along with improved sales productivity. Despite a slight dip in gross margins due to one-time hardware deployment, the operating margin exceeded expectations, highlighting the company’s operational efficiency.
Furthermore, Zscaler’s shift to an ARR model provides flexibility in pricing and enhances customer engagement, as evidenced by significant growth in TCV bookings. The company’s revenue diversification strategy is on track, with its growth vectors contributing significantly to ARR. Although there might be short-term pressure on gross margins due to new product introductions, the long-term outlook remains positive with expected improvements in operating margins and continued growth in free cash flow. These factors collectively support the Buy rating and the price objective of $340.
In another report released yesterday, Morgan Stanley also upgraded the stock to a Buy with a $320.00 price target.