RBC Capital Markets analysts continue to believe the market opportunity for Zscaler Inc. (NASDAQ:ZS) is larger than investors anticipate, which should help the company drive durable growth and margin expansion.
In a note to clients on Thursday, the analysts raised their target price on Zscaler to $350 per share from $335, while maintaining an ‘Outperform’ rating on the stock.
They see the company having a “unique opportunity” to monetize artificial intelligence (AI), which could be a “multi-year catalyst” as Zscaler is helping customers not only protect models, but also agent to agent communication.
“We believe Zscaler is a unique software growth asset where AI can serve as an accelerant to growth versus a headwind," the analysts wrote.
In a recent meeting with the company’s CEO and CFO, the RBC analysts found the tone around fundamental drivers to be positive, including in four areas: increased customer focus on Zero Trust Everywhere; the ability to protect agent communication; increased customer interest in security operations; and data security.
They see the company’s Zero Trust Everywhere market, which could be worth more than $100 billion, continuing to expand over time.
The analysts also believe Zscaler’s cloud security platform is well positioned to disrupt $20 billion of legacy security spending currently that could imply a total addressable market of more than $72 billion.
Zscaler shares eased 0.3% to $303.54 in midday trading on Thursday.