Zscaler Stock Presents Buying Opportunity Despite Recent Underperformance, Strong Growth and Improving Profitability Outlook
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Zscaler (ZS) stock has underperformed recently, creating a buying opportunity given strong fundamentals like 35% revenue growth and 19.6% operating margins.
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ZS continues growing over 100% with large customers and maintains a net cash balance sheet, putting it in a position to reach GAAP profitability soon.
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Management sees success selling multiple products to customers, which may reduce net retention rate but boost profitability.
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I value ZS at 12.4x forward sales, representing significant upside for the stock from current $167 price.
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Risks include premium valuation leading to volatility, growth slowdown faster than expected, and potential headwinds from AI advancement.