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Why Zscaler Stock Climbed 18.6% in July

By Keith Noonan – Aug 9, 2020 at 9:11AM

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The cloud cybersecurity software company's stock has skyrocketed roughly 170% this year.

What happened

Shares of Zscaler (ZS -3.68%) rose 18.6% in July, according to data from S&P Global Market Intelligence. The company's valuation climbed thanks to favorable coverage from analysts and momentum for the broader market.

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RBC Capital published a note on Zscaler on July 6, with analyst Matthew Hedberg putting an "outperform" rating on the stock and giving it a one-year price target of $130 per share. Hedberg's target on the stock suggested roughly 15% upside at the time of the note's publication, and Zscaler received more positive coverage from analysts and climbed higher as the month progressed.

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So what

Yun Kim, an analyst at Rosenblatt, published a note on Zscaler stock on July 7, maintaining a "buy" rating on the stock and hiking his one-year price target for the company from $115 to $135 per share. The note was followed by coverage from Citi analyst Walter Pritchard two days later, upgrading the firm's rating on the stock from "neutral" to "buy" and putting a $152 per share one-year price target on the stock -- up from his previous target of $86 per share. 

Wedbush analyst Daniel Ives also gave a positive nod to Zscaler stock, maintaining an "outperform" rating on the cybersecurity company and raising his price target from $100 to $150. Ives pointed to indications that Zscaler was continuing to see strong new contract additions and was benefiting from work-from-home scenarios created by the coronavirus pandemic. 

Now what

Zscaler stock has slipped early in August's trading. The company's share price is down roughly 3% in the month so far. 

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Zscaler is scheduled to report fourth quarter earnings results after the market closes on Sept. 9. The company is guiding for quarterly revenue between $117 million and $119 million and non-GAAP (adjusted) earnings per share between $0.02 and $0.03. 

Zscaler has a market capitalization of roughly $16.4 billion and trades at roughly 29.5 times this year's expected sales. 

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Zscaler. The Motley Fool has a disclosure policy.

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