Should You Buy, Sell or Hold ZS Stock After a 46% Rise in 3 Months?
Zscaler, Inc. ZS shares have climbed 46% in the past three months, outperforming the Zacks Security industry's return of 10.7%. ZS stock has also outperformed its industry peers, including CyberArk Software CYBR, Palo Alto Networks PANW and CrowdStrike CRWD. Shares of CyberArk, Palo Alto Networks and CrowdStrike have risen 8.3%, 4.8% and 23.2%, respectively, over the past three months.
With Zscaler's massive rise in the past three months, investors now face a key decision: Should they hold on to the stock or book a profit?
ZS is Growing Through its Deep Cybersecurity Capabilities
Zscaler has achieved multiple milestones in 2025. ZS launched the Asset Exposure Management solution to enhance organizations' asset risk management capabilities. Zscaler has also partnered with SAP to integrate its Zero Trust Network Access service, Zscaler Private Access, within SAP's RISE framework. This integration will enable enterprises to reduce their reliance on traditional VPNs and firewalls and simplify cloud migrations while complying with evolving regulations.
ZS has also expanded its capabilities inorganically with the acquisition of Red Canary, which is a leading provider of Managed Detection and Response solutions in security operations. The organic and inorganic expansion of capabilities is enabling Zscaler to match the rising threats of nation-state cyber warfare, ransomware extortion and increasing incidents of malware attacks.
Zscaler is also enhancing its portfolio of offerings with the integration of artificial intelligence (AI) in its products. Zscaler partnered with NVIDIA and integrated NVIDIA's AI technologies, including NIM inference microservices, NeMo Guardrails and Morpheus framework into its Zero Trust Security model. Zscaler partnered with CrowdStrike to leverage CrowdStrike's AI expertise in SIEM, threat intelligence, cyber risk quantification and real-time insights.
With all these product and capability enhancements, the demand for Zscaler's cybersecurity solutions remains strong as reflected by its financials. In the third quarter of fiscal 2025, ZS attained a 12-month trailing dollar-based retention rate of 114%, driven by larger bundle sales and robust upsells.
Remaining Performance Obligations, which represent committed, non-cancelable future revenues, were boosted by 30% year over year. At the end of the third quarter, the company had 642 customers with $1 million or higher annualized recurring revenues (ARR). Zscaler's customer count for ARR of more than $100,000 reached 3,363 at the end of the third quarter.
Zscaler Expands its Footprint in Government Client Base
Zscaler is rapidly enhancing its GovCloud solutions to receive approvals from the governing bodies. ZS is expanding its presence among government agencies through compliance with government security standards.
Zscaler has enabled numerous government agencies to utilize AI-powered Cloud Browser Isolation and IPv6 for secure connectivity, mainstreaming its GovCloud solution among its federal clients.
In the last reported quarter, Zscaler reported that it is serving 14 out of 15 U.S. cabinet-level agencies. As more government agencies use Zscaler's products, the company's presence in the public sector could expand, providing a stable growth stream.
Zscaler's recent inclusion in Amazon Web Services' Internet Control Message Protocol, which will ensure that Zscaler's cybersecurity solutions will now be readily accessible to U.S. federal agencies, furthers its reach among federal agencies.
Rising Costs and Shrinking Margins are a Concern for ZS
Zscaler faces intense competition from other established cybersecurity players, including Palo Alto Networks, CyberArk and CrowdStrike. Zscaler Internet Access and Private Access face competition from Palo Alto Networks Prisma Access, Prisma SD-WAN, CrowdStrike Falcon Zero Trust, CyberArk Secure Web Sessions and CYBR Identity Security Platform.
To survive in the highly competitive cybersecurity market, Zscaler is continuously investing in broadening its capabilities. Over the past few years, ZS has invested heavily to enhance its S&M capabilities, particularly by increasing the sales force. Unfortunately, its aggressive investment in S&M and R&D might weigh on its near-term profitability.
Zscaler now expects its non-GAAP earnings per share for fiscal 2025 in the band of $3.18-$3.19. The Zacks Consensus Estimate for Zscaler's fiscal 2025 earnings is pegged at $3.06 per share, reflecting a 4% year-over-year decline.
Image Source: Zacks Investment Research
Premium Valuation is a Concern for Zscaler
Zscaler holds a premium valuation, reflected in its Zacks Value Score of F. This is further reinforced by its Forward 12-month P/S ratio of 13.92X, significantly exceeding the Zacks Computer and Technology sector's average of 5.54X.
Conclusion: Hold ZS Stock for Now
Although Zscaler faces challenges related to increasing expenses, shrinking margins and premium valuation, the company's heavy investment in AI, innovative cybersecurity capabilities, customer retention and long-term contracts with government agencies make the stock worth retaining at present. Zscaler carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Zacks Names #1 Semiconductor Stock
It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.
With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.
See This Stock Now for Free >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Palo Alto Networks, Inc. (PANW): Free Stock Analysis Report
CyberArk Software Ltd. (CYBR): Free Stock Analysis Report
Zscaler, Inc. (ZS): Free Stock Analysis Report
CrowdStrike (CRWD): Free Stock Analysis Report
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Globe and Mail
29 minutes ago
- Globe and Mail
Palantir Stock Deep Dive Financial Statement Analysis
The AI company is delivering excellent performance for both investors and customers. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More » *Stock prices used were the afternoon prices of May 30, 2025. The video was published on June 1, 2025. Should you invest $1,000 in Palantir Technologies right now? Before you buy stock in Palantir Technologies, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palantir Technologies wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $657,385!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $842,015!* Now, it's worth noting Stock Advisor 's total average return is987% — a market-crushing outperformance compared to171%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of June 2, 2025 Parkev Tatevosian, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy. Parkev Tatevosian is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.
Globe and Mail
43 minutes ago
- Globe and Mail
3 Reasons Amazon Could Be the Best Tech Performer in June
Inc. (NASDAQ: AMZN) has been up nearly 30% since April and is already bouncing back swiftly after a minor dip last week. That short bout of profit-taking was more of a pause than a reversal, and the stock has quickly regained its footing, a textbook sign of a healthy uptrend. Heading into June, there are several reasons to believe that Amazon could outpace its big tech peers this month. Here are three of them. 1. Overwhelming Analyst Support [content-module:Forecast|NASDAQ:AMZN] Recently, Wall Street analysts have continued to support Amazon. In the last few weeks alone, firms like Citigroup and Tigress Financial have reiterated their Buy ratings, while Bank of America did the same on Monday of this week and even raised its price target to $248. From where the stock was trading during Tuesday's morning session, that points towards nearly 20% in potential upside. Bank of America's bullishness is grounded in Amazon's aggressive push into robotics. Analyst Justin Post estimates that further warehouse and delivery automation could unlock as much as $16 billion in annual cost savings by 2032. Amazon now has over 750,000 robots assisting with 75% of customer orders, and its newest robot, Vulcan, actually uses a sense of touch to improve sorting and fulfillment accuracy. Post believes these innovations will accelerate Amazon's shipping and fulfillment advantages and significantly enhance margins, especially as e-commerce becomes more price-transparent under AI-driven dynamics. He sees long-term retail operating margins potentially doubling, which should be music to the ears of investors right now. That kind of efficiency boost, layered on top of Amazon's already dominant position, helps explain why analysts are piling in, and it all bodes well for the stock's performance. 2. Strong and Improving Fundamentals Beyond the robotics story, Amazon continues to deliver where it matters. Revenue is consistently reported to be up year-over-year in its quarterly earnings reports, profitability is robust, and the company is improving margins across core business lines. Its advertising unit is consistently growing at a double-digit clip, third-party seller services are becoming more profitable, and AWS remains a long-term growth engine. While Amazon has flagged that its expenses will be increasing in the near term, largely as a result of cost-intensive AI-capable data centers, investors appear confident that this spending will fuel the next wave of cloud and infrastructure dominance. Bank of America, for example, sees serious crossover potential between Amazon's robotics efforts and its AI capabilities within AWS. That's the kind of flywheel effect that should yield major long-term leverage, and given how well the stock is performing, it appears investors are already buying into this. 3. Bullish Technical Setup The final reason to be excited about the tech giant heading into June is the fact that, technically speaking, Amazon is flashing all the right signals. The stock is in a well-defined uptrend, setting higher highs and higher lows since April. That structure is typically a strong sign that buyers are in control and momentum is building. Its Relative Strength Index (RSI) is trending higher but still only around 60, meaning there's plenty of room before the stock becomes overbought. Meanwhile, the MACD is on the verge of another bullish crossover, a key signal that could ignite the next leg of the rally. When a fundamentally strong company like Amazon also lines up technically, it creates a powerful case for further upside and clears the way for further bullish momentum. [content-module:TradingView|NASDAQ:AMZN] What to Watch in June All that being said, between analyst enthusiasm, improving efficiency metrics, and bullish technicals, Amazon has clearly positioned itself as one of the best-performing large-cap tech stocks heading into June. If momentum continues and the robotics narrative continues to deepen, the $248 price target from Bank of America might not be the ceiling, just a stop on the way. Investors watching from the sidelines may want to keep a close eye on that MACD signal and any further analyst commentary, as these could serve as further tailwinds that will only send Amazon shares to higher highs. Before you make your next trade, you'll want to hear this. MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. Our team has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and none of the big name stocks were on the list.
Globe and Mail
an hour ago
- Globe and Mail
Eli Lilly's (LLY) CFO to Participate in Goldman Sachs Health Conference
Eli Lilly and Co. (LLY) has announced that its chief financial officer (CFO) will participate in the upcoming Goldman Sachs (GS) Global Health Care Conference. Confident Investing Starts Here: Eli Lilly CFO Lucas Montarce will be featured in a fireside chat at the conference at 8 a.m. on June 10. A live audio webcast will be available on Eli Lilly's investor website, and a replay of the presentation will remain on the site for 90 days after the event. It's not clear what will be discussed during the fireside chat, but there is certainly lots to discuss, from Eli Lilly's ongoing battle with rival Novo Nordisk (NVO) for weight loss drug supremacy, to U.S. President Donald Trump's pledge to lower prescription drug costs for Americans, and looming tariffs on pharmaceutical imports. Leading Conference Goldman Sachs' Global Health Care Conference is an annual event that is now in its 46th year. The event brings together leading experts in the health care space to discuss a number of issues impacting the industry, including medical trends, medication breakthroughs, and investment opportunities. As one of America's leading drug makers, Eli Lilly typically has a large presence at the conference. CFO Lucas Montarce's participation in a fireside chat comes as interest grows in Eli Lilly's development of a pill version of its popular Zepbound weight loss medication, which is working its way through regulatory approvals. Is LLY Stock a Buy? The stock of Eli Lilly has a consensus Strong Buy recommendation among 19 Wall Street analysts. That rating is based on 17 Buy, one Hold, and one Sell recommendations issued in the last 12 months. The average LLY price target of $1,003.60 implies 33.23% upside from current levels.
