Title: An Excellent Growth Stock Experiencing a 44% Drop: Wall Street's Verdict to Purchase
Cybercrime is set to cause an astronomical $10.5 trillion in damages to the global economy by 2025, reported by Cybersecurity Ventures. With an unprecedented number of businesses operating online, they become prime targets for attackers who can strike at any moment, from any corner of the world.
Zscaler, a frontrunner in zero-trust cybersecurity, has recently witnessed a staggering 111% surge in spyware attacks over the past year alone. These malicious software programs are notorious for infiltrating computers and stealing sensitive data such as financial information or crucial employee credentials. Fortunately, Zscaler's solutions can help mitigate the fallout.
Despite a 44% drop in Zscaler stock from its all-time high, which occurred during the tech frenzy in 2021, Wall Street remains bullish on the company's prospects. And there are several compelling reasons why investors should consider following suit.
soaring above traditional cybersecurity
The advent of technologies like cloud computing and remote workforces have opened up new business opportunities but also introduced new risks. Managers now have to keep track of employees who may be in entirely different countries, making it impossible to physically monitor their access to company networks and sensitive data.
This poses a significant challenge that traditional cybersecurity software is ill-equipped to handle. That's where Zscaler's Zero-Trust Exchange platform comes in. By viewing every login attempt as a potential threat, the platform analyzes more than just the username and password. It also considers factors like the user's location and the device they are using, to ensure it's really them.
In addition, Zscaler only connects employees to the digital applications required for their job. If a malicious actor manages to breach the identity layer, they are still unable to access the organization's entire network or sensitive information.
AI-powered protection and expansion
Artificial intelligence plays a vital role in Zscaler's platforms, enabling rapid identity verification in mere seconds. The company is also broadening its product portfolio to include protection for businesses using AI. This way, organizations can deploy AI copilots, chatbots, and virtual assistants securely, thanks to tools that limit their access to sensitive information and prevent data leaks.
At present, Zscaler secures more than 9 billion security breaches every day, showcasing the sheer volume of threats that organizations face. This disconcerting figure underscores the importance of robust cybersecurity measures.
impressive growth and profitability
Zscaler's fiscal 2025 first-quarter revenue surged by 26% to a record $628 million. Management's updated revenue guidance now projects a full-year total of $2.63 billion - an impressive leap from the $2.61 billion forecast just three months prior.
Furthermore, Zscaler managed to slash its quarterly net loss by 64%, indicating a marked improvement in profitability. On an adjusted (non-GAAP) basis, the company even generated a profit during this period.
Zscaler strives to balance its pursuit of growth with profitability, targeting a more sustainable business strategy for the future. While this shift has led to a decline in its stock price, the company still retains the potential to deliver steady returns for investors.
Wall Street's buoyant outlook
The Wall Street Journal tracks 45 analysts who cover Zscaler stock, with an overwhelming majority - 26 - awarding it the highest possible buy rating. The remaining analysts are almost unanimously bullish, recommending either holding or overweight positions. Not a single analyst advises selling, further underscoring Wall Street's bullish sentiment.
Analysts predict a 9% increase in Zscaler stock prices over the next 12 to 18 months, with the highest estimates reaching a 31% climb. Based on these projections, Zscaler stock could offer attractive upside potential for investors.
conclusion: an investment opportunity with longevity
Zscaler's superior growth profile, coupled with its strong revenue performance and positive analyst recommendations, make it an attractive investment opportunity. While the increasing threat landscape poses challenges, the company's ability to adapt and innovate in the cybersecurity space bodes well for its future.
The stock's current valuation, with a price-to-sales (P/S) ratio of 13.6, is significantly lower than its historical average of 26.9. Zscaler stock would need to nearly double in price to reach this mark, signifying significant upside potential.
Furthermore, Zscaler's vast addressable market of $96 billion across Zero Trust, data protection, and AI solutions underscores its long-term growth prospects. With an estimated 82% market share in the Zero Trust market, the company has barely tapped into its full potential.
Against this backdrop, Zscaler stock might offer a compelling investment opportunity in the face of growing cybersecurity threats and an expanding remote workforce. However, investors should stay informed about the evolving threat landscape and the company's ability to address it effectively.
In the context of investing, considering the current cybersecurity landscape and the growing reliance on remote workforces, it might be beneficial for investors to allocate some funds towards companies that specialize in cybersecurity solutions, such as Zscaler. Despite the recent dip in Zscaler stock price, analysts remain bullish, predicting a potential 9% to 31% increase over the next 12 to 18 months.
Given Zscaler's exceptional growth, strong revenue performance, and positive analyst recommendations, as well as its vast addressable market worth $96 billion in Zero Trust, data protection, and AI solutions, it could present a promising investment opportunity for those looking to diversify their portfolio in the finance sector. However, it's essential to closely monitor the evolving threat landscape and the company's ability to foster innovation in the cybersecurity space. Additionally, money invested in stocks comes with inherent risks, and it's always wise to do thorough research or consult with a financial advisor before making any investment decisions.
