What Happened?
Shares of cloud security platform Zscaler (NASDAQ:ZS) jumped 5.1% in the afternoon session after the stock's momentum strengthened following the strong first quarter 2025 results reported the previous week, which exceeded Wall Street's sales, operating profits, and earnings (EPS) estimates.
In response, Wall Street analysts maintained bullish ratings, with several raising their price targets, reflecting increased confidence in the company's growth potential.
UBS raised its price target from $260 to $315 while reiterating a Buy rating, suggesting the firm saw significant upside potential.
Canaccord Genuity analyst Kingsley Crane also raised the stock's price target from $230 to $305 and maintained a Buy rating. He noted that Zscaler outperformed consensus expectations across all key metrics in the quarter. In addition, the company's acquisition of Red Canary was highlighted as an important move into the managed detection and response (MDR) market, a rapidly growing segment. The analyst emphasized that the deal could improve Zscaler's security operations center (SOC) capabilities.
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What The Market Is Telling Us
Zscaler’s shares are somewhat volatile and have had 11 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 3 days ago when the stock gained 8.4% on the news that the company reported impressive first-quarter 2025 results, with billings, revenue, EPS, and adjusted operating income outperforming Wall Street's estimates.
Management clarified there were no changes in the macro environment, which tempered growing concerns cited by peers that reported earlier.
Notably, broader market trends around AI and cybersecurity, highlighted by a reported 3,000% increase in enterprise AI usage, suggested an expansion in the addressable market. This is expected to be augmented by recent acquisitions, including Red Canary and Avalor, for data security management. Red Canary reported $140M ARR earlier in the year, suggesting it will be a significant contributor to growth.
Looking ahead, Zscaler reported optimistic full-year EPS guidance, which exceeded analysts' expectations. Overall, we think this was still a solid quarter with some key areas of upside.
Zscaler is up 59.4% since the beginning of the year, and at $289.50 per share, has set a new 52-week high. Investors who bought $1,000 worth of Zscaler’s shares 5 years ago would now be looking at an investment worth $2,727.
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