Analyst Note
| Mark Cash |We are raising our fair value estimate of narrow-moat Zscaler to $205 per share from $180 after reporting its fourth-quarter results. Our increase stems from higher confidence in Zscaler continuing its streak of rapid growth behind secular tailwinds pertaining to zero-trust security and digital transformations, as well as Zscaler gaining operating leverage in the long term by locking customers into its ecosystem. We expect Zscaler’s more nascent products in digital experience and cloud workload protection to rapidly grow in the near term, and also help bolster customer switching costs as organizations consolidate spending with its platform. While we believe Zscaler will continue to be a beneficiary of organizations requiring security for directly accessing Internet-based resources, cloud workload protection, and remote access, we view shares as overvalued.