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Should you buy or sell ZScaler stock as Wedbush calls 25% upside?

on Dec 3, 2021
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  • ZScaler shares on Thursday gained more than 4% to trim Wednesday’s post-earnings losses.
  • It comes after receiving Wedbush’s PT raise to $400 from $320 after delivering solid FQ1 results.
  • The company announced its most recent quarterly results Tuesday after markets closed.

On Wednesday, Wedbush Securities raised its price target on ZScaler Inc. (NASDAQ:ZS) shares to $400 from $320, following the cybersecurity company’s solid FQ1 results. 

The company posted its most recent quarterly results Tuesday after markets closed, beating analyst expectations on revenue and earnings. Wedbush analyst Dan Ives was particularly impressed by the astronomical quarterly revenue growth.

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The company’s FQ1 revenue increased by nearly 62% from the same quarter a year ago to $230.62 million, surpassing consensus Street expectations by $18.24 million. On the other hand, its non-GAAP earnings per share of $0.14 outperformed the expectation of $0.12, while the GAAP EPS of -$0.65 missed by $0.15.

ZScaler also issued FQ2 and FY2022 revenue guidance above Street forecasts. Analyst Ives thinks the shift towards zero-trust on the web will drive ZScaler’s top-line growth.

Time to bet on the pullback?

Although ZScaler shares trade at a steep forward P/E ratio of 329.41, analysts expect its earnings per share to recover from this year’s decline of 117% with a bounce of 71.28% next year and an annual growth rate of 46.20% over the next five years.

Therefore, the stock could be an exciting option for long-term growth investors.

Source – TradingView

Technically, ZScaler shares seem to have recently bounced back after completing a downward breakout from an ascending channel formation. As a result, the stock still trades below the trendline support, leaving room for more upward movement.

Therefore, investors could target extended rebounds at about $346.99, or higher at $371.07, while $313.72 and $289.39 are crucial support zones.