Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 13 Nov, 24 | ZS | Buy | USD 209.04 | USD 227.0 | USD 240.0 | 91 days | 14.8% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
Zscaler, Inc. operates as a cloud security company worldwide. The company offers Zscaler Internet Access solution that provides users, workloads, IoT, and OT devices secure access to externally managed applications, including software-as-a-service (SaaS) applications and internet destinations; and Zscaler Private Access solution, which is designed to provide access to managed applications hosted internally in data centers, and private or public clouds. It also provides Zscaler Digital Experience that measures end-to-end user experience across business applications, as well as provides an easy-to-understand digital experience score for each user, application, and location within an enterprise. In addition, the company offers Posture Control solutions comprising cloud applications and workload data security to protect data in public cloud environments; and Cloud Infrastructure Entitlement Management that provides deep granularity into identity and privilege access management. Further, it provides Workload Segmentation solutions that secures application-to-application communications inside public clouds and data centers; and Zero Trust Device Segmentation solutions that offers agentless segmentation for enterprise IT and OT environments, as well as Zero Trust SD-WAN solutions. Its platform modules include Zscaler Central Authority, Zscaler Enforcement Node, and Zscaler Log Servers. The company serves customers in airlines and transportation, conglomerates, consumer goods and retail, financial services, healthcare, manufacturing, media and communications, public sector and education, technology, and telecommunications services industries. The company was formerly known as SafeChannel, Inc., and changed its name to Zscaler, Inc. in August 2008. Zscaler, Inc. was incorporated in 2007 and is headquartered in San Jose, California.
Improved Cash Flow and Liquidity: Free cash flow increased to $291.9 million (46% of revenue) from $224.7 million (45% of revenue) in the prior year, and cash, cash equivalents, and short-term investments rose by $298.2 million to $2,707.9 million as of October 31, 2024.
Strong Revenue Growth: The company reported $628.0 million in revenue, reflecting a 26% year-over-year increase, demonstrating strong business expansion.
Decline in GAAP Operating Profitability: The GAAP loss from operations was $30.7 million (5% of revenue), which, while better than the $46.1 million loss (9% of revenue) in the previous year, still indicates ongoing operational cost challenges.
GAAP Net Loss: Despite revenue growth, the company reported a GAAP net loss of $12.1 million, though this was an improvement from the $33.5 million loss in the same quarter of the previous year.
Key investment risks for Zscaler include ongoing GAAP net losses despite revenue growth, potential scalability and performance challenges as daily transactions exceed half a trillion, heightened cybersecurity threats that could impact customer trust, and reliance on strategic partnerships for Zero Trust and AI-driven security innovations.
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 209.04 | 180.0 | 227.0 | 240.0 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
Technical Analysis: On the daily chart, ZS has rebounded from significant support levels and is currently rising, indicating a potential short-term uptrend. This upward movement is reinforced by indications that the company's performance is stabilizing, hinting at a possible breakout from its ongoing consolidation phase. As the company shows resilience and stability, the probability of a sustained upward trend grows, which could lead to a retest of its prior highs.
ZS is recommended as a new entry in the 'Momentum Model Portfolio' as on Nov 13, 2024. Considering the technical analysis, support and resistance levels, a 'Buy' is recommended at the close market price of USD 209.04 as on Nov 12, 2024.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Technology Industry: Software - Infrastructure
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| ZS Zscaler Inc |
0.50 0.25% | 198.92 | - | 66.23 | 13.58 | 20.15 | 11.88 | 291.93 |
| MSFT Microsoft Corporation |
5.93 1.58% | 381.32 | 37.32 | 29.94 | 13.03 | 12.45 | 13.06 | 24.59 |
| ORCL Oracle Corporation |
2.11 1.51% | 141.92 | 29.34 | 18.66 | 5.55 | 74.06 | 7.10 | 18.13 |
| ADBE Adobe Systems Incorporated |
-3.47 0.90% | 380.06 | 46.32 | 26.81 | 11.51 | 16.73 | 11.55 | 31.20 |
| PANW Palo Alto Networks Inc |
-0.45 0.26% | 170.19 | 44.57 | 45.05 | 11.98 | 20.70 | 11.82 | 77.11 |
Data Powered by EOD Historical Data (“EODHD”).
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is November 13, 2024. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
Disclaimer :
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