This morning, Needham maintained their Strong Buy rating on Zscaler’s stock with a price target of $235.00.

Based on the comprehensive analysis of Zscaler’s recent performance and future prospects, Needham’s maintained Strong Buy rating on Zscaler’s stock with a price target of $235.00 can be confidently attributed to several key factors:

Robust Financial Performance and Growth Trajectory: Zscaler demonstrated a strong financial performance in FY4Q with a revenue increase of 30% to $592.9M, surpassing guidance and consensus expectations. The company’s billings grew by 27% year-over-year to $910.8M, indicating a solid demand for its services. This performance is underpinned by Zscaler’s ability to consistently add large customers, as evidenced by the addition of 44 customers with more than $1M in ARR in FY4Q alone, bringing the total to 567, a 26% year-over-year increase. The continued expansion in their customer base, especially among large enterprises, suggests a strong market fit and growing reliance on Zscaler’s offerings.
Strategic Positioning and Product Innovation: Zscaler’s strategic focus on emerging products and the expansion of its security offerings, such as ZDX, Data Protection, and Zero Trust solutions, have contributed significantly to its growth. These products accounted for approximately 22% of new ACV in FY24, aligning with management’s expectations and showing an increase from 18% in FY23. The company’s innovation trajectory, particularly in AI Analytics and Zero Trust for Workloads, positions Zscaler favorably in the rapidly evolving cybersecurity landscape. This focus on innovation not only enhances Zscaler’s competitive edge but also broadens its total addressable market (TAM), potentially leading to sustained long-term growth.

These factors, combined with Zscaler’s guidance for FY25 which anticipates a reacceleration in billings growth and the company’s strong positioning within the Federal sector, support the outlook for continued out-performance and justify a strong buy recommendation.

Susquehanna Shyam Patil 60% 1-year accuracy 34 / 57 met price target	34%upside $210	Positive Maintained	5 Sept 2024
Rosenblatt Catharine Trebnick 40% 1-year accuracy 23 / 57 met price target	21%upside $190	Neutral Maintained	4 Sept 2024
JP Morgan Brian Essex 69% 1-year accuracy 20 / 29 met price target	40%upside $220	Overweight Maintained	4 Sept 2024
B of A Securities Tal Liani 47% 1-year accuracy 9 / 19 met price target	24%upside $195	Neutral Downgraded	4 Sept 2024
JMP Securities Trevor Walsh 67% 1-year accuracy 36 / 54 met price target	72%upside $270	Market Outperform Reiterated	4 Sept 2024

ZscalerZS

Fund manager confidence

29% more repeat investments, than reductions

2% less capital invested

6% less call options, than puts

1.63% less ownership

2% less funds holding

11% less first-time investments, than exits

38% less funds holding in top 10

Research analyst outlook

29 analyst ratings

Financial journalist opinion

Zscaler
ZS