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Zscaler Inc

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Morningstar Rating for Stocks Fair Value Economic Moat Capital Allocation

Zscaler Closes Out Q2 Above Our Estimates As Macro Outlook Remains Tight; Maintain FVE

We are maintaining our $170 fair value estimate for narrow-moat Zscaler after the firm closed out a mixed second quarter with strong growth tempered by continued macroeconomic tightness. While the turbulent macroenvironment continues to affect near-term results, we remain optimistic of Zscaler’s long-term opportunity. We believe that Zscaler’s zero-trust security offerings continue to be industry leading, and that the firm stands to materially benefit from the convergence of networking and security. Not only does the firm benefit from these secular tailwinds, but the firm has also built an economic moat around its business through strong customer switching costs and network effects associated with its solutions. With Zscaler’s shares down more than 10% after hours, we think that the firm is trading at an attractive price for long-term investors.

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