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Zscaler Inc

ZS: XNAS (USA)
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Morningstar Rating for Stocks Fair Value Economic Moat Capital Allocation
$193.00GgtsnHtjmtwxns

Zscaler Earnings: Robust Sales Growth Goes Hand in Hand With Strong Margin Expansion

We are maintaining our $183 fair value estimate for narrow-moat Zscaler after the firm kicked off fiscal 2024 with strong sales growth and profitability. While macroeconomic uncertainty continues to affect customer decisions, we were encouraged to see Zscaler’s strength in landing new business as well as expanding existing client spending. With an eye on the long term, we believe Zscaler stands to materially benefit as organizations seek cloud-native security vendors to manage their increasingly complex security needs. Further, as a security vendor that provides multiple solutions across a client’s security apparatus, we think Zscaler will benefit from increased vendor consolidation as customers seek to refocus their security spending toward a smaller set of vendors. With Zscaler’s shares trading down after the earnings report, we view them as fairly valued.

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