Zscaler 4Q Sales Outperform Fueled By Cybersecurity Demand

Zscaler delivered stronger-than-expected 4Q results, thanks to the robust demand for cloud-based cybersecurity solutions amid the COVID-19 pandemic-led remote working trend.

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Zscaler’s (ZS) 4Q revenues climbed 46% to $125.9 million year-over-year, beating analysts’ expectations of $118.6 million. The cloud-based cybersecurity provider’s adjusted EPS of $0.05 declined nearly 29% on a year-over-year basis, but came ahead of the Street consensus of $0.03. The company said that during the reported quarter it experienced increased sales and marketing and R&D expenses.

Looking ahead, in fiscal 1Q, Zscaler projects revenues between $131 million and $133 million, which is higher than analysts’ estimates of $127 million. The adjusted EPS guidance range of $0.05-$0.06 is also above the consensus of $0.03. (See ZS stock analysis on TipRanks).

As for fiscal 2021, revenues and adjusted EPS are forecasted in the range of $580-$590 million and $0.28-$0.30, respectively. Analysts expect revenues and earnings of $423.9 million and EPS of $0.21, respectively.

Ahead of the earnings, RBC Capital analyst Matthew Hedberg this week raised the stock’s price target to $141 (5.1% upside potential) from $130 and reiterated a Buy rating. Hedberg had expected Zscaler to report “strong” 4Q results. The analyst believes that the company is “well positioned to disrupt” the Zero Trust security market which is expected to grow rapidly in the post-pandemic era.

Currently, the Street has a cautiously optimistic outlook on the stock, with a Moderate Buy analyst consensus. The average analyst price target of $145.64 implies upside potential of 8.5% from current levels. Shares are up nearly 189% year-to-date.