Zscaler Inc (ZS) shares experienced a significant decline on Wednesday following the release of the cybersecurity company’s fiscal fourth-quarter financial results. Despite exceeding revenue and earnings estimates, analysts expressed concerns about future growth and lowered their price targets for the stock.
During the quarter, Zscaler reported total revenue of $592.9 million, surpassing the consensus estimate of $567.933 million. Earnings per share (EPS) came in at 88 cents, exceeding expectations of 69 cents. This represented a 30% year-over-year increase in revenue and a 32% increase in deferred revenue to $1.895 billion. Zscaler also reported a 27% year-over-year growth in calculated billings, reaching $910.8 million. Cash flow from operations for the quarter totaled $203.6 million, while free cash flow reached $136.3 million, a significant improvement from the prior year’s quarter. The company concluded the quarter with approximately $2.41 billion in cash, equivalents, and short-term investments.
Despite these positive figures, analysts remain cautious about Zscaler’s future growth prospects. Needham analyst Alex Henderson maintained a Strong Buy rating on the stock but lowered the price target from $290 to $235. Similarly, Baird analyst Shrenik Kothari maintained an Outperform rating while lowering the price target from $260 to $225. Loop Capital analyst Yun Kim downgraded Zscaler to a Hold rating, lowering the price target from $180 to $165. Cantor Fitzgerald analyst Yi Fu Lee also downgraded the stock to Neutral, reducing the price target from $200 to $170.
As a result of these concerns, Zscaler shares plummeted by 17.2% on Wednesday morning, trading at $159.84 at the time of publication. Investors are closely watching the company’s future performance to assess its long-term growth potential.
