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Zscaler rises as analysts see it as a strong cloud cybersecurity play

Of the 10 analysts who cover Zscaler, five have buy or overweight ratings and five hold ratings

A man looking at a computer hacked sign
Goldman believes the stock already prices in their 'bull case' scenario

Zscaler Inc. (NASDAQ:ZS) was buoyed on Wednesday after a flurry of analysts initiated coverage on the cloud-based cybersecurity company with half of them assigning the equivalent of a buy rating, and the rest the equivalent of a hold rating.

Zscaler shares were up 2.6% at US$28.77 in midday trading. The stock has more than doubled from its March 18 IPO price of $16 a share.

BTIG analyst Joel Fishbein, who initiated coverage with a Buy rating and $33 price target, told MarketWatch that while “shares are not inexpensive” the stock is “a must-own name given Zscaler’s transformational nature.”

“While Zscaler shares look expensive based on conventional sales multiples, getting comfortable with the growth potential is key to owning this highly disruptive company,” said Fishbein.

Among the bulls on the stock, Needham & Co.’s Alex Henderson inited coverage with a Strong Buy rating and a $35 price target, writing that the company is a “foundational name in security” and is “highly disruptive to the traditional perimeter defense security model."

"Much like ANET, we expect Zscaler to become a major company by 2022-2024, with a billion plus Revenue base with a pure SaaS 100% cloud model," Henderson wrote in research note.

Baird’s Jayson Noland and Credit Suisse’s Brad Zelnick also thumped the table for Zscaler, citing it as a strong cloud play.

Goldman Sachs, Merrill Lynch, Deutsche Bank, Barclays, and Stephens & Co. all have the equivalent of a Hold rating on Zscaler, citing high valuations as the main issue holding them back.

Goldman’s Gabriela Borges, assigned a Neutral rating and a $25 price target, writes that she believes the stock already prices in her “bull case” scenario.

Of the 10 analysts who cover Zscaler, five have buy or overweight ratings and five have hold or equivalent ratings, with an average target price of US$31.60, according to FactSet data.

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