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Why Zscaler Stock Gained 17.1% in March

By Keith Noonan – Apr 8, 2020 at 8:27AM

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The cybersecurity stock has climbed 34% year to date despite a nearly 18% slide for the S&P 500 index.

What happened

Shares of Zscaler (ZS -0.92%) climbed 17.1% in March, according to data from S&P Global Market Intelligence. The cloud-security company's stock climbed as more businesses took their work digital and dramatically outperformed the broader market last month.

^SPX Chart

^SPX data by YCharts.

Zscaler Private Access (ZPA) and Zscaler Internet Access (ZIA) are seeing increased use as customers aim to keep workflows steady and secure amid coronavirus-related challenges. The heightened demand for cybersecurity and private-network services helped the company's stock bounce back from a roughly 7% sell-off that occurred in February after second-quarter results arrived with third-quarter guidance that fell short of the market's expectations. 

A cloud security icon on top of an illustration of the Earth

Image source: Getty Images.

So what

Zscaler's third-quarter guidance underwhelmed the marked in February, but CEO Jay Chaudhry published a letter on Microsoft's LinkedIn platform on March 15 detailing some positive business developments amid the novel coronavirus crisis.

Chaudhry's LinkedIn post stated that Zscaler's overall traffic had more than tripled since January -- with the company's recently opened Milan data center seeing huge usage and traffic being more than 12 times higher in China, six times higher in Seoul, and two times higher in Tokyo.

Now what

Zscaler stock has continued to gain ground in early in April's trading. The company's share price is up roughly 2.5% in the month so far.

^SPX Chart

^SPX data by YCharts.

Per the guidance the company issued in February, Zscaler expects to post non-GAAP (adjusted) third-quarter earnings per share between $0.01 and $0.03 on sales between $105 million and $107 million. For the full-year period, the company is guiding for adjusted earnings between $0.14 and $0.16 per share and total revenue to be between $414 million and $417 million.  

Zscaler is valued at roughly 19.5 times this year's expected sales.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Microsoft and Zscaler and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Zscaler Stock Quote
Zscaler
ZS
$164.37 (-0.92%) $-1.52
Microsoft Corporation Stock Quote
Microsoft Corporation
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