On Friday, BofA Securities maintained its Buy rating on Zscaler (NASDAQ:ZS) stock with a consistent price target of $265.00.
The firm's analysis indicated that approximately half of the year-over-year growth for the quarter came from new customers, signaling that Zscaler is continuing to build momentum.
The company has been closely observed, especially considering its robust billings performance. Although Zscaler is experiencing a solid influx of new clients, the firm also noted some emerging challenges.
Following the departure of Chief Operating Officer Dali Rajic, an uptick in sales attrition was observed, which the company expects to influence billings by 2-3 percentage points. This impact is anticipated to be most significant in the fourth quarter of 2024 and the first half of 2025.
Zscaler's management has forecasted that the attrition will affect billings, with a projected billings growth of around 20% year-over-year for fiscal year 2025. This figure falls short of the previously estimated 22.6% by the market analysts.
Furthermore, the company has provided guidance on its revenue growth, expecting it to be approximately 4-5% quarter-over-quarter throughout fiscal year 2025.
This rate suggests an estimated 18-20% year-over-year revenue growth for the fiscal year, which is below the market's projection of 25.2%.
The anticipated slower growth is linked to the current transitions within the company's sales team. However, Zscaler remains optimistic that the productivity of new hires will bolster growth in the second half of fiscal year 2025, helping to mitigate the initial impact of the sales attrition.
The firm's reiteration of the Buy rating reflects confidence in Zscaler's long-term growth trajectory despite the short-term challenges it faces.
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