Why Zscaler Stock Topped the Market on Thursday

Key Points

• Investors were sure placing a lot of trust in the zero-trust cybersecurity solutions provider.

• This was helped by an analyst's price target raise the day before.

• 10 stocks we like better than Zscaler ›

Cybersecurity specialist Zscaler (NASDAQ: ZS) was a winner of a stock on Thursday, rising by nearly 3% in price. Investors were juiced by an analyst's recommendation upgrade, accompanied by a meaty price target raise. That sub-3% climb was more than sufficient to beat the S&P 500 (SNPINDEX: ^GSPC) on the day; this ticked up by a relatively modest 0.8%.

Freedom to upgrade

That change in recommendation came from Freedom Capital Markets pundit Almas Almaganbetov, who upped his rating to buy from the previous hold. With the move, Almaganbetov also confidently raised his price target on Zscaler by 14%, resetting it to $320 per share for the specialty tech company.

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The analyst's modifications are largely due to the company's performance in its fiscal fourth quarter, the results of which were published last week. According to reports, Almaganbetov wrote admiringly of the company's performance -- revenue rose 21% year over year for the period, while annual recurring revenue (ARR) clocked a 22% gain, and calculated billings advanced by 32%.

The pundit believes this illustrates the strong and resilient demand for Zscaler's wares. He was also encouraged by the fact that such growth was broad-based across Zscaler's suite of product offerings, including its relatively new artificial intelligence (AI)-enhanced solutions.

Knee-jerk reaction

It should be noted that not everyone was as impressed with Zscaler's quarter. In fact, investors as a group sold out of its stock in the immediate post-earnings trading session; what didn't help was the company's surprise net loss -- on average, analysts were expecting Zscaler to land well in the black. Since then, however, the share price has generally been on an upward trend.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Zscaler. The Motley Fool has a disclosure policy.