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Zscaler Inc ZS

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Morningstar’s Analysis

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Securing Cloud Traffic and Network Access Propel Robust Growth in Q4 for Zscaler; Lift FVE to $205

Mark Cash Senior Equity Analyst

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.

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Company Profile

Business Description

Zscaler is a security-as-a-service firm that offers its customers cloud-delivered solutions for protecting user devices and data. The firm leverages its position in 150 colocation data centers to deliver traditionally appliance-based security functionality, such as firewalls and sandboxes, as a completely cloud-native platform. The firm focuses on large enterprise customers and offers two primary product suites: Zscaler Internet Access, which securely connects users to externally managed application and websites (such as Salesforce and Google), and Zscaler Private Access, which securely connects users to internally managed applications. Both product suites encompass a broad gamut of capabilities situated across the traditional security stack.

120 Holger Way
San Jose, CA, 95134
T +1 408 533-0288
Sector Technology
Industry Software - Infrastructure
Most Recent Earnings Jul 31, 2021
Fiscal Year End Jul 30, 2022
Stock Type Speculative Growth
Employees 3,153