Zscaler Inc. (NASDAQ:ZS) stock edged slightly lower on Tuesday despite receiving an upbeat comment from Mizuho Securities. The Japan-based investment banking firm raised its Zcaler stock price target from $250 per share to $280, implying an upside potential of 16.7%.
The stock now trades at around $240 per share, a few levels below its all-time high of $249.71 reached earlier in August. Mizuho analysts said the company’s billings could grow by 43% this year as companies move to strengthen online security checks.
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Zscaler shares are up 22.80% this year and more than 93% over the last 12 months. However, the bull run could continue if the company performs according to expectations in the coming quarters.
From a valuation perspective, Zscaler shares seem steeply priced at a forward P/E ratio of 437.82. Moreover, analysts expect its earnings per share to fall by a whopping 283% this year before increasing 17.80% next year. Therefore, value investors may opt for alternatives amid the high valuation.
However, Zscaler’s bottom-line could rise at an annual rate of more than 66% over the next five years, making the stock an attractive option for growth investors. As such, the ZS stock seems like a good investment for investors willing to overlook the short-term turbulence.
Technically, Zscaler shares seem to be trading within an ascending channel formation in the intraday chart. As a result, the stock price has surged several levels above the 100-day moving average.
However, it has recently pulled back to trade a few levels from overbought conditions of the 14-day RSI, leaving room for a rebound. Therefore, investors can target potential rebounds at approximately $247.81 or higher at $255.61. The key support levels are $234.69 and $226.59.
In summary, although analysts expect Zscaler earnings to fall by more than 283% this year, the prospective 5-year annual growth rate of about 66.6% is appealing to growth investors. Therefore, the stock could be compelling to investors willing to overlook the bumpy ride in the short term.
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