Zscaler, a formidable force in the world of cloud security, has witnessed a tumultuous journey in the stock market. An ardent upward trajectory abruptly halted by a glaring 20% plunge post its 2024 preliminary results. Traders watched warily as the once soaring stock tumbled to $162, failing to keep pace with industry rivals Palo Alto Networks, Check Point Software, and Fortinet, all basking in double-digit growth.
Despite the recent downturn, Zscaler’s stock maintains a modest 45% surge from its 2023 baseline, a silver lining amidst the stormy clouds cast over the market horizon.
Is Zscaler Stock at Rock Bottom?
The stock’s ascent post-2023 found roots in staggering revenue growth of over 40% between 2016 and 2023. However, profitability remained elusive, casting uncertainty over its lofty valuations.
In a telling revelation, Zscaler reported a resilient 30% annual sales growth in 2024, yet financial woes linger at the operating level. Although losses have significantly narrowed, doubts loom over the stock’s true nadir, with Trefis pegging its fair value near $155 – signaling a potential further decline.
The Elusive Attractiveness of ZS Stock
Amidst volatility, Zscaler’s returns have danced to a capricious tune – from a mere 6% in 2021 to a staggering 95% in 2023, yet underperforming the S&P in prior years. Contrastingly, the Trefis High Quality Portfolio stood gallantly, outshining the S&P each passing year, proving that stability often outperforms mere volatility.
As the macroeconomic landscape trembles with uncertainty, could Zscaler emulate its past missteps and lag behind the market, or is a phoenix-like revival in the works?
Peering into ZS’s Future
In a bid to regain lost ground, Zscaler foresees a 22% revenue uptick in Q1 FY2025, a modest projection amidst tempestuous waters. The recent market correction, triggered by revenue stagnation forecasts, beckons for redemption – a crucial turning point for the beleaguered stock.
| Returns | Sep 2024 MTD [1] |
2024 YTD [1] |
2017-24 Total [2] |
| ZS Return | -16% | -27% | -66% |
| S&P 500 Return | -2% | 16% | 147% |
| Trefis Reinforced Value Portfolio | -4% | 9% | 710% |
[1] Returns as of 9/5/2024
[2] Cumulative total returns since the end of 2016
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
