Zscaler (ZS) PT Lowered to $230 at Citi, Adds 90-Day Upside Catalyst Watch

Citi analyst Fatima Boolani lowered the price target on Zscaler (NASDAQ: ZS) to $230.00 (from $240.00) while maintaining a Buy rating.

The analyst comments "Negative-leaning absolute (frustration with billings guide/seasonality) and relative (PANW, CRWD preferred in rest of mid/large-cap cyber) sentiment, along with 2H-weighted execution risk, have put ZS in a penalty box, contributing to the stock’s dramatic underperformance at -25% YTD. With bears controlling the narrative, it’s clear investors are still negotiating: a) SASE market maturation; b) related (mis)perceptions of intensifying competitive + pricing/ARPU-ceiling factors; c) attrition/ramp concerns from recent GTM leadership/sales org and capacity changes; and, to lesser extent d) subdued “Act II”-product conviction that risks thwarting durable, compounding 25%+ billings growth. Our fieldwork on these fronts continues to screen stable/resilient, ultimately skewing more encouraging than prevailing concerns, which, against recalibrated-lower expectations and discount valuation, underwrites our comfort in reaffirming our Buy, and initiating a 90-day positive catalyst watch on shares. On the basis of encouraging prelim demand/competitive/market health work against mixed-to-negative sentiment, discount valuation to peers that we think is too wide, and shares’ stark YTD underperformance (ZS -25% YTD is one of the worst returns in our coverage, and below the 50th percentile in broader software), we are opening a positive catalyst watch on the stock. This is based on our view that ZS can upside low expectations and gradually neutralize the intensity of market share loss/ARPU erosion fears in prevailing sentiment."

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