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This Cybersecurity Competitor Is Promising but Pricey

Zscaler has impressive technology, but we think the valuation has gotten ahead of itself.


In expanding our cybersecurity coverage, we recently initiated on no-moat Zscaler, a cloud security name that went public back in March. Zscaler competes with Symantec and Cisco. We think Zscaler has impressive technology, and to understand the value proposition of this business, we need to understand the transitions that are occurring across the software and network security names that we cover.

Years ago, enterprise applications, such as Oracle or even Microsoft Office, sat in the enterprise's data center. Corporate personal computers would connect to that data center to access applications and the enterprise's security stack sat in the data center. That was essentially the drawbridge to access the open Internet.

William Fitzsimmons does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.