Shares of Zscaler jumped 12.1% in Wednesday’s extended trading after the cybersecurity firm raised its FY21 guidance driven by its better-than-expected 1Q results.
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Zscaler’s (ZS) 1Q earnings of $0.14 per share rose from the year-ago quarter’s earnings of $0.04 and handily surpassed the Street’s estimates of $0.06. Its revenues increased 52% year-over-year to $142.6 million and topped the consensus estimate of $132.3 million.
Zscaler’s CEO Jay Chaudhry said, “Our customers are accelerating their digital transformation, and this drove our strong first quarter results.” He added, “Organizations are turning to the Zscaler Zero Trust Exchange platform for the right security architecture, which can be implemented easily and rapidly.”
The company raised its fiscal 2021 revenue guidance to $608-$612 million, up from the earlier forecast of $580-$590 million. Analysts were expecting FY21 sales of $588.2 million. Further, Zscaler now expects fiscal 2021 earnings in the range of $0.37-$0.38 per share compared to its previous guidance of $0.28-$0.30. Analysts’ estimates stood at $0.31 per share.
As for 2Q, Zscaler expects EPS of $0.07-$0.08, compared to the Street consensus of $0.07. The company projects 2Q revenue in the range of $146-148 million, topping the Street’s estimates of $140.3 million. (See ZS stock analysis on TipRanks)
Following the results, BMO Capital analyst Keith Bachman raised the stock’s price target to $170 (15.8% upside potential) from $155, citing the company’s large total addressable market (TAM). Meanwhile, Bachman maintained a Hold rating on the stock as he believes that the company is “expensive” by most metrics, but TAM justifies its “premium” valuation. Overall though, the analyst views the company as “one of the best-positioned security companies” in his coverage.
Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 10 Buys and 7 Holds. The average price target stands at $156.71 and implies upside potential of about 6.8% to current levels. Shares have rallied by 215.7% year-to-date.
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