Zscaler Inc.’s shares rallied Tuesday after an analyst upgraded the cybersecurity stock on higher confidence the company will make its revenue targets as business spending loosens up from a year of recessionary fears.
Shares of Zscaler ZS, +4.87% surged more than 5% to an intraday high of $ 156.33, while the ETFMG Prime Cyber Security ETF HACK, +1.27% was up a little more than 1% Tuesday.
On Tuesday, BTIG analyst Gray Powell upgraded the stock to a buy from a neutral and set a $ 185 price target, on the basis that he now has a “much higher degree of confidence” in the company’s ability to maintain 30% or higher revenue growth over the next few years.
Powell said that “feedback has been consistently positive” from contacts, channel partners, analysts, and contacts including some Fortune 500 chief information security officers responsible for their company’s purse strings, over the past few months.
“In short, our fieldwork leads us to believe that demand in the Secure Service Edge (SSE) has sustainably improved and that large projects which were put on hold in late 2022 / early 2023 are starting to move forward again,” Powell said in a note. “In
addition, we left our work feeling confident in Zscaler’s ability to maintain its leadership position in the SSE market despite headlines on increasing competition.”
Late Monday, cloud security company F5 Inc. FFIV, +6.24% topped earnings expectations adding it was on track for double-digit non-GAAP earnings growth for fiscal 2023, and shares rallied Tuesday more than 13% to an intraday high of $ 167.89.
In its earnings report from June, Zscaler’s results and outlook topped Wall Street expectations at the time but shares fell under pressure amid a tough software spending environment. Zscaler next reports in September.
Pure-play cybersecurity companies have come under recent scrutiny ever since Microsoft Corp. MSFT, +1.74% said it was expanding its cybersecurity offerings, with one analyst saying the move posed “potential longer-term ramifications” to companies like Zscaler, Cloudflare Inc. NET, +2.68%, Fortinet Inc. FTNT, +1.57%, Check Point Software Technologies Ltd. CHKP, +1.21%, and Palo Alto Networks Inc. PANW, +0.07%.
For the year, the HACK index is up 17%, while the S&P 500 index SPX, +0.45% has gained 19%, the tech-heavy Nasdaq Composite COMP, +0.88% has surged 36%, and the Dow Jones Industrials Average DJIA, +0.19% has advanced 7%.