What happened
On Hump Day, numerous stocks bucked the generally bearish turn of the market, but Zscaler (ZS -3.62%) wasn't one of them. The cybersecurity company's share price fell marginally (by 0.3%) on the back of an assertive price target cut from an analyst tracking the stock.
So what
The cutter was Credit Suisse prognosticator Sami Badri. Wielding a very sharp pair of scissors, he reduced his Zscaler estimate to $165 per share from his previous $275. That doesn't mean he's now a Zscaler bear, though, as despite the deep cut he maintained his outperform (i.e., buy) recommendation on the stock.
The reasons for Badri's substantially reduced Zscaler expectations weren't immediately apparent, but it's surely no coincidence that his change comes mere weeks after the company's latest earnings release.
Earlier this month, Zscaler dropped its second quarter of fiscal 2023 results. In and of themselves, they looked very robust -- revenue shot 52% higher on a year-over-year basis, while the company managed to narrow its net loss based on generally accepted accounting principles (GAAP) considerably. Free cash flow more than doubled. Both the top- and bottom-line numbers easily topped the average analyst estimates, as did quarterly and full-fiscal-year 2023 guidance.
Now what
Relatively young tech companies, however, are often gauged by their growth rates. Some investors, it seems, have found Zscaler's wanting. They might be zeroing in on that full-year anticipated revenue figure, which if met would equate to growth of around 45% over the 2022 result. That's well down from last year's 62% improvement.
It's easy to get hung up about slimming growth, but that shouldn't necessarily be a dealbreaker with Zscaler. The company is a solid player in cybersecurity, and it operates in a sector that is currently popular and will stay that way in a world rife with digital threats.
