Zscaler is the IBD Stock of the Day as the cybersecurity firm becomes actionable coming off a rebound from its 10-week moving average. Zscaler stock has climbed 36% in 2023, with most of the gain coming after the company preannounced financial results for the April quarter.
With that May 8 preannouncement — for its fiscal third quarter — management eased worries over rising competition with Palo Alto Networks, startup Netskope and others. ZS shares gapped up after that announcement and kept rising.
A few weeks later, Zscaler reported that earnings rose 182% to 48 cents a share as revenue climbed 46% to $418.8 million. Billings, a sales growth metric, also increased 40% to $482.3 million.
With its pullback and bounce off the 10-week moving average, ZS stock cut above a down-sloping trendline. Further, the stock is currently actionable with its bounce off the 10-week line.
Zscaler shares jumped 7.8% to close at 154.27 on the stock market today.
ZS Stock A 'Zero Trust' Leader
San Jose, Calif.'s Zscaler sells cloud-based computer security services via 150 data centers worldwide. Then customers route their business workloads and app traffic to the data centers where Zscaler's security software checks data traffic for malware.
The company garners most of its revenue from Zscaler Internet Access, or ZIA. It's a cloud-based replacement for on-premises web security gateways.
Zscaler Private Access, or ZPA, is a newer product and drives new customer growth. Further, the ZPA service replaces virtual private networks, or VPNs, that companies typically use to support remote work.
In addition, analysts generally describe Zscaler as a leading "zero trust" security service provider. In a zero-trust model, cybersecurity firms verify the identity of network users and limit access to applications.
Plans For Artificial Intelligence
Meanwhile, at the cybersecurity firm's annual customer conference — Zenith Live 2023 in Las Vegas on June 13-15 — Zscaler updated analysts on its product roadmap. Zscaler plans new artificial-intelligence initiatives.
"We come away from Zscaler's innovations conference incrementally positive on its market position," ZS stock analyst Kidron Singh from Oppenheimer said in a recent note to clients. "Our conversations with current/potential customers and channel partners reinforced our view regarding Zscaler's technological leadership and as a mission-critical security partner for enterprises."
At the conference, Zscaler also announced its entry into the identity threat detection and response market.
"It will focus on stopping social engineering (phishing) attacks that utilize compromised identities and user credentials," TD Cowen analyst Shaul Eyal said in a note. "ZS can now quantify the identity risk, discover risky configurations, offer real-time monitoring, detect and stop attacks in the event of a compromise, and provide guidance for risk remediation along with (employee) tutorials."
Zscaler Technical Ratings
Zscaler stock earns a stellar Composite Rating of 98. Meanwhile, its earnings score, the EPS Rating, is a perfect 99. Also, it holds a Relative Strength Rating of 82.
ZS stock has an Accumulation/Distribution Rating of B-. That analyzes price and volume changes in a stock over the past 13 weeks of trading. The B- rating indicates more funds are buying than selling.
The A/D Rating, on an A+ to E scale, measures institutional buying and selling in a stock. Further, A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
Meanwhile, management has told ZS stock analysts that pricing pressure has increased in parts of the cybersecurity market.
Startup Netskope competes against Zscaler in data loss prevention and cloud access security broker, or CASB, services. CASB enables organizations to identify and manage the use of software-as-a-service and cloud applications.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
