Zscaler Tanks as Analysts Comb Through Guidance Disappointment

Analysts are mixed on Zscaler after the cloud security company issued lighter-than-expected profit guidance.
Author:
Publish date:

Zscaler  (ZS) - Get Report dropped sharply Friday despite mostly bullish notes from the analyst community after the cloud security company issued lighter-than-expected profit guidance for the third quarter and fiscal year.

Analysts at Bank of America raised the stock's price target to $73 from $70 a share and maintaining their buy rating.

At Wedbush, analysts called Zscaler's fiscal second-quarter report solid thanks to billings beats of 15% or more over the last year. “We believe the Street will be disappointed with a beat of 4%.” The firm maintained its outperform rating and $80 price target on the stock.

Goldman Sachs analysts said that the company’s second-quarter performance was adequate “but light of buy-side expectations.” Meanwhile, revenue deceleration and margin contraction in the second half will put pressure on the stock, the analysts said.

Goldman has a neutral rating and raised its price target on Zscaler shares to $60 from $53 a share.

Citi was disappointed with a “less-than-typical upside,” with fiscal 2020 sales and billing guidance that missed expectations. The firm maintained its neutral rating and $50 price target.

Needham reiterated a strong buy rating with a Wall Street high price target of $89 a share.

Shares of San Jose-based Zcaler fell 11.6% to $57.60 in premarket trading.

In he second quarter ended Jan. 31, the cybersecurity company reported adjusted earnings of 9 cents a share on revenue of $101.2 million.

The company had been expected to report adjusted earnings of 3 cents a share, on sales of $99 million, based on a FactSet survey of 18 analysts.

Zscaler forecast fiscal-third-quarter non-GAAP earnings per share of 1 cent to 3 cents on revenue of $105 million to $107 million.

Analysts had been predicting non-GAAP earnings of 4 cents on sales of $104.5 million, according to FactSet.