Zscaler Jumps 20% Due to Good News in Its Q3 Results

Today at 8:10 AM ET, Zscaler (NASDAQ:ZS) stock rose 20.05% to $91.00 in the pre-market session following its results for the third quarter of fiscal 2020 on Thursday. Notably, the quarter ended on April 30. The cybersecurity company posted higher-than-expected results in the third quarter. Zscaler’s sales and earnings numbers beat analysts’ consensus estimates. The company also provided strong fourth-quarter guidance.

Zscaler’s Q3 earnings results

In the third quarter, Zscaler reported an adjusted EPS of $0.07 compared to $0.05 in the third quarter of fiscal 2019. The adjusted EPS beat analysts’ consensus estimate of $0.02. Zscaler generated sales of $110.5 million—a growth of 39.7% from the third quarter of fiscal 2019. The company beat analysts’ consensus revenue estimate of $106.4 million.

In the third-quarter earnings release, Zscaler CEO Jay Chaudhry said, “Our strong results are a reflection of our sales execution and the entire Zscaler team stepping up to help our customers succeed in these difficult times. The mitigation activities taken by every enterprise in response to the COVID-19 pandemic created an immediate need for strong security and access to the internet and business applications, all while working from anywhere.” Chaudhry added, “The digital transformation that is driving our business is further accelerating, and we believe the Zscaler cloud security platform is best positioned to help our customers thrive no matter where their teams are working.”

In the fourth quarter, Zscaler expects total revenue between $117 million and $119 million. The company also expects its adjusted EPS to be $0.02–$0.03 for the fourth quarter.

For fiscal 2020, Zscaler expects total revenue between $422 million and $424 million. The company expects its adjusted EPS to be $0.20–$0.21 for fiscal 2020.

Wall Street analysts expect Zscaler to report an adjusted EPS of $0.02 on revenue of $117.7 million in the fourth quarter. Analysts also expect the company’s sales to rise 39.2% YoY (year-over-year) in fiscal 2020 to $421.6 million. The sales could rise 29.7% YoY in fiscal 2021 to $546.7 million. Meanwhile, the adjusted earnings will likely fall 18.2% YoY in fiscal 2020 to $0.18 per share. However, the profits could rise 44.4% YoY to $0.26 per share in fiscal 2021.

Analysts’ recommendations and target price

Among the 23 analysts following Zscaler stock, 12 recommend a “buy,” ten recommend a “hold,” and one recommends a “sell.” Analysts’ mean price target on the stock is $84.19, which implies an 11.1% gain from the current level of $75.80. The consensus target price for the stock has risen from $67.90 in April—a growth of 24%.

Many analysts revised their target price for Zscaler stock after its third-quarter earnings release.

  • D.A. Davidson increased its target price from $65 to $105.
  • Piper Sandler increased its target price from $55 to $75.
  • Credit Suisse increased its target price from $75 to $90.
  • Citigroup increased its target price from $49 to $86.
  • Needham increased its target price from $89 to $110.
  • Wedbush increased its target price from $80 to $100.
  • Cowen and Company increased its target price from $80 to $100.
  • Rosenblatt Securities increased its target price from $75 to $115.

Stock returns

Zscaler stock rose 1.7% on Thursday and ended the day at $75.80. At this closing price, the company’s market cap is $9.8 billion. Notably, the stock is trading 15.4% below its 52-week high of $89.54 and 116.6% above its 52-week low of $35.00.

Based on the closing price on Thursday, Zscaler stock was trading 2.3% above its 20-day moving average of $74.09. The stock is also trading 12.4% above its 50-day moving average of $67.45 and 23.9% above its 100-day moving average of $61.17. Zscaler’s 14-day relative strength index number is 58 which indicates that it isn’t overbought or oversold.

Zscaler stock has an upper Bollinger Band level of $80.26, while its lower Bollinger Band level is $67.92. On Thursday, Zscaler stock closed near its middle Bollinger Band level of $74.09, which indicates that it’s neutral.

At 8:10 AM ET today, the S&P 500 futures declined 0.30%, while the Dow futures declined 0.43%. Read Could Trump’s News Conference Trigger a Market Crash? to learn more.