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Here's Why Zscaler's (ZS) Rally is Likely to Continue Further

Zscaler's (ZS) stock is likely to sustain the upward momentum as it is gaining from the rising demand for cyber-security solutions owing to the slew o...

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This story originally appeared on Zacks

Zscaler ZS is currently one of the top performing stocks in the technology sector. The stock’s price rally reflects the company’s robust fundamentals. Therefore, if you haven’t taken advantage of the share-price appreciation yet, it’s time you add the stock to your portfolio now.

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The company has performed brilliantly, year to date, and has the potential to carry on the momentum further.

Why an Attractive Pick?

Share-Price Appreciation: Zscaler’s price trend reflects that the stock has had an impressive run on the bourse in the year-to-date (YTD) period. Shares of the company have surged 41.7% compared with the Zacks Computer and Technology sector’s gain of 27.1% and the S&P 500’s 22%.

YTD Price Performance

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Image Source: Zacks Investment Research

Solid Rank & Growth Score: Zscaler currently carries a Zacks Rank #2 (Buy) and has a Growth Score of B. Our research shows that stocks with a Growth Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or #2, offer the best investment opportunities for investors. Thus, the company appears to be a compelling investment proposition at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.

Positive Earnings Surprise History: Zscaler has an impressive earnings surprise history. The company outpaced estimates in all of the trailing four quarters, delivering an average earnings surprise of 84.8%.

Zscaler, Inc. Price, Consensus and EPS Surprise

Zscaler, Inc. Price, Consensus and EPS Surprise

Zscaler, Inc. price-consensus-eps-surprise-chart | Zscaler, Inc. Quote

Solid Growth Prospects: The Zacks Consensus Estimate of 47 cents for fiscal 2021 earnings suggests growth of 95.8% from the year-ago period. Moreover, earnings are expected to register 18.2% growth in fiscal 2022 and reach 56 cents per share. The long-term earnings per share growth rate is estimated to be 50.6%.

 

Growth Drivers: Zscaler is benefiting from the rising demand for cyber-security solutions owing to the slew of data breaches.

Increasing requirement for privileged access security on the back of digital transformation and cloud migration strategies is fueling demand for cybersecurity solutions. The COVID-19 pandemic has further prompted the incidence of cyber onslaughts, as businesses of all sizes are transitioning their operations to various online platforms.

The company’s efforts to strengthen its cloud security capabilities, amid the remote-working wave and digital transformations, are noteworthy. In December last year, it introduced Zscaler Cloud Protection, a portfolio of solutions that enhances protection for cloud workloads on any cloud platform.

Zscaler’s Zero Trust Exchange platform detects the most sophisticated attacks, ransomware, and other unethical movements in the cloud. In addition, the company’s Edge cloud for policy enforcement, multi-tenancy, proxy for SSL or TLS inspection and zero-trust network access is well poised to gain adoption amid the thriving remote work culture.

Moreover, with the addition of new capabilities to Zscaler’s Zero Trust Exchange, such as Cloud Access Security Broker, Cloud Browser Isolation, Cloud Protection, ZDX and CSPM for SaaS applications, the company is expanding its product portfolio, which is helping it add new customers.

Considering Zscaler’s growth prospects, it makes sense to invest in the stock for long-term gains.

Other Stocks to Consider

Some other top-ranked stocks in the broader technology sector include Microsoft MSFT, Cadence Design Systems CDNS, and NVIDIA NVDA, all carrying a Zacks Rank of 2, at present. The long-term earnings growth rate for Microsoft, Cadence Design, and NVIDIA is currently pegged at 11.1%, 11.7%, and 17.7%, respectively.



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Microsoft Corporation (MSFT): Free Stock Analysis Report

 

NVIDIA Corporation (NVDA): Free Stock Analysis Report

 

Cadence Design Systems, Inc. (CDNS): Free Stock Analysis Report

 

Zscaler, Inc. (ZS): Free Stock Analysis Report

 

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