Zscaler: Rating Downgrade As Market Optimism Peaks

Aug. 30, 2024 9:27 AM ETZscaler, Inc. (ZS) StockZS5 Comments
Dair Sansyzbayev
8.92K Followers
(8min)

Summary

  • I am downgrading Zscaler to "Hold" due to potential near-term headwinds and cooling sentiment around growth stocks, despite strong long-term fundamentals.
  • Zscaler's recent earnings showed impressive revenue growth, improved operating margins, and strong free cash flow, but seasonality and market sentiment pose risks.
  • Upcoming earnings on September 3 are expected to show continued growth, but investor focus will also be on management's forward-looking comments and partnerships.
  • Valuation analysis suggests ZS is fairly valued at around $30 billion, with risks of market sentiment and macro-headlines affecting short-term stock performance.

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Investment thesis

My previous bullish thesis about Zscaler (NASDAQ:ZS) was an earnings preview. This aged well as the stock rallied by 23% since May 29, significantly outperforming the S&P 500.

The company reports its quarterly earnings soon, and today I

This article was written by

8.92K Followers
I am a highly experienced Chief Financial Officer (CFO) with a strong background in the oilfield and real estate industries. With over a decade of experience in finance, I have led numerous complex due diligence efforts and M&A transactions, both domestically and internationally.In recent years, I have developed a keen interest in equity research and analysis of public companies. This interest has led me to render equity research services for a Dubai-based family office with over $20 million in assets under management (AUM). My expertise in finance allows me to provide valuable insights and recommendations to clients seeking to make informed investment decisions.I pride myself on my ability to analyze financial statements, evaluate market trends, and identify key drivers of growth in different industries. I am passionate about staying up-to-date on the latest developments and trends in the equity research industry, and I am always seeking to enhance my skills and knowledge through continuing education and professional development.

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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