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Zscaler vs. Check Point Software: Which Cybersecurity Stock Could Yield Higher Returns?

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·6 min read
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  • CHKP
  • ZS

There is a rise in the adoption of cloud computing services for enterprise data storage. This is also leading to cyber attacks on cloud-based infrastructure, creating a need for cloud-based security solutions.

According to a MarketsandMarkets research report, the global cloud security market is expected to grow from $34.5 billion last year to $68.5 billion by 2025, at a compounded annual growth rate (CAGR) of 14.7%.

Using the TipRanks Stock Comparison tool, let us compare two cybersecurity companies, Zscaler and Check Point Software, and see how Wall Street analysts feel about these stocks.

Zscaler (NASDAQ: ZS)

Zscaler is a cloud-based security solutions provider that provides four integrated and comprehensive solutions to its customers, using the Zscaler Zero Trust Exchange.

This includes secure access to the Internet and software-as-a-service (SaaS) with Zscaler Internet Access (ZIA), segmentation of workload, management of the user-to-application experience with Zscaler digital experience (ZDX), and secure access to internal applications with Zscaler private access (ZPA).

In the fiscal Q3, Zscaler saw its revenues jump 60% year-over-year to $176.4 million. Non-GAAP net income was $0.15 per share in Q3 versus $0.07 per share in the same quarter last year.

For the fiscal fourth quarter, ZS expects revenues to range between $185 million and $187 million, and non-GAAP net income of $0.08 per share to $0.09 per share. For FY21, total revenue forecast is between $660 million to $664 million while non-GAAP net income is expected to be $0.47 per share.

Last week, Canaccord Genuity analyst Michael Walkley participated in the company’s virtual Zenith Live user conference and came away bullish on the stock. Walkley reiterated a Buy rating and a price target of $250 (14.2% upside) on the stock.

Walkley stated that enterprises are increasingly looking at adopting cloud-based cybersecurity platforms that would reduce complexity. This is where Zscaler comes in, as it connects “users directly to applications, whether they are SaaS [software-as-a-service] apps hosted in a third-party cloud or apps hosted in on-premise data centers and hybrid cloud instances.”

The company views its total serviceable market to be in excess of $72 billion, and Walkley believes that the company is “well positioned to displace $30B+ in legacy network and security spend.”

Last month, the company also announced the acquisition of Smokescreen Technologies for an undisclosed amount. The acquisition is expected to close in the fiscal fourth quarter of this year. Smokescreen’s threat intelligence and telemetry, combined with Zscaler Zero Trust Exchange, will give the company the ability to detect precisely targeted security attacks. (See Zscaler stock chart on TipRanks)

Walkley said about the acquisition, “We note both Trustdome and Smokescreen are startups with limited revenue contributions but important technologies to complement Zscaler’s core competencies. As such, these acquisitions impact our F2022 operating expense estimates by ~$15M.”

ZS announced the acquisition of Trustdome in April this year for an undisclosed amount. The acquisition was expected to complete in Q3. Trustdome is an innovator in Cloud Infrastructure Entitlement Management (CIEM), and Walkley thinks that this acquisition has resulted in a more complete cloud security portfolio for ZS that would address a variety of public cloud security issues.

According to the analyst, Zscaler’s proxy architecture, which closely integrates core network, cloud security and digital experience monitoring, gives it a sustainable competitive advantage over security firewall companies that add secure access service edge (SASE) capabilities, mainly through acquisitions.

Consensus among analysts on Wall Street is a Strong Buy based on 13 Buys and 4 Holds. The average analyst Zscaler price target of $231.65 implies approximately 5.8% upside potential to current levels.

Check Point Software Technologies (NASDAQ: CHKP)

Check Point is a global provider of cyber security solutions to governments and corporate enterprises. The company’s key products include CloudGuard, a native security platform, and Harmony, a unified solution to enable secure access to any resource and give users total endpoint protection.

CHKP’s Quantum Spark is a series of security gateways for small and medium size businesses (SMBs).

The company posted revenues of $508 million, an increase of 4% year-over-year, and reported non-GAAP earnings of $1.54 per share, a rise of 9% year-over-year.

Earlier this month, the company expanded the capabilities of its unified Cloud Native Security Platform with Check Point CloudGuard Workload Protection. This is a fully automated cloud workload security solution that will provide security teams with tools to automate security across applications.

This month, Cowen & Co. analyst Shaul Eyal conversed with CHKP’s CFO Tal Payne and VP of IR Kip Meintzer at Cowen’s virtual Annual TMT Conference. Following the chat, Eyal was bullish with a Buy rating and a price target of $140 (19.7% upside) on the stock.

The analyst said in a note to investors, “Our top 3 takeaways are: 1) Business fundamentals remain healthy as businesses gradually return to normal operations. 2) CloudGuard & Harmony adoption momentum is high. 3) Capital allocation balancing share buybacks and technology tuck-in acquisitions remains intact.”

According to Eyal, the company saw a record level of turnout at its virtual Check Point Experience (CPX) 360 event earlier this year and the company doubled “the number of customers and partners at over 14K.”

The analyst added that the recent leadership changes in sales “could re-energize CHKP's US sales operations…The sales teams are strategically incentivized to penetrate new logos addressing greenfield opportunities in growth areas such as CloudGuard & Harmony rather than upsell into an existing base to maximize growth potential.”

Check Point launched Infinity in April this year. That is a consolidated, cybersecurity architecture to prevent “Fifth Generation” attacks across endpoints, mobile and IoT devices, networks, and cloud deployments. (See Check Point Software stock chart on TipRanks)

Eyal is optimistic about Infinity and envisions Infinity as a "longer-term beneficiary of customers' demand for high performance at a reasonable cost without experiencing the headache of engaging multiple vendors to safely keep the IT infrastructure secure.”

Consensus among analysts on Wall Street is a Hold based on 2 Buys and 8 Holds. The average analyst Check Point Software price target of $133.63 implies approximately 14.2% upside potential to current levels.


While analysts are bullish about Zscaler, they are sidelined on Check Point Software. When it comes to Check Point, analyst Eyal believes that compared to its competitors, CHKP is experiencing a slow but definite momentum in the cloud security business.

For Eyal, CHKP’s balance sheet, with zero debt and a cash balance of $4 billion and industry-leading operating margin of 45% “should provide CHKP the flexibility to continue its consistent, clockwork-like share repurchases (averaging >$1.0B annually) as well as smaller technology tuck-in acquisitions.”

Meanwhile, analyst Walkley affirmed that ZS is poised to gain market share “as a long-term disruptive technology, and we view the stock as a core long-term holding for investors.”

Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.