Investing.com– Stifel raised its price target on Zscaler Inc (NASDAQ:ZS) on Tuesday, saying the cybersecurity firm’s first analyst day since 2021 strengthened the case for its artificial intelligence prospects.
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Stifel hiked Zscaler’s target to $235 from $200 and maintained its Buy rating on the stock.
Zscaler hosted the event on Tuesday, where management outlined its strategy, broader product lineup, go-to-market priorities and mid-term financial model, Stifel analysts said in a note.
The analysts said management made a strong case for the growing importance of both securing AI and using AI to improve security. They said Zscaler’s zero-trust architecture was the right approach, given rising adoption of AI agents and agentic threats.
The biggest surprise was a fiscal 2031 annual recurring revenue target, Stifel said. They had expected management to focus only on mid-term profitability.
Zscaler gave a base case of more than $8 billion in ARR, a 17% compound annual growth rate, and an upside case of $10 billion, or 22% growth, on AI tailwinds.
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Stifel said the base case looked achievable and was in line with fiscal 2027 guidance. The upside case would require a reacceleration in growth, which the brokerage said was possible but not something it was underwriting yet.
Profitability targets were largely in line with expectations. Zscaler guided to a fiscal 2031 operating margin of 27% to 30% and a free cash flow margin of 29% to 32%.
Management also reaffirmed its first-quarter and full-year fiscal 2027 targets, which the analysts called a positive after the recent change in chief revenue officer.
Stifel said Zscaler may have set a higher bar with the $10 billion target, but it left the event more positive on the company’s market opportunity, which management pegged at $220 billion.
The analysts said AI agents needed to be secured in a zero-trust manner to prevent lateral movement and agent misbehavior. They said that represented an emerging opportunity, given the unique data Zscaler sees and generates.
They added that Zscaler had several drivers to sustain at least mid-to-high-teens revenue growth and margin expansion in the coming years.
Original Article
Zscaler: Stifel hikes target on AI cybersecurity prospects
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