Zscaler (ZS) Soars 21% on Strong Q3 Prelim, FY23 Guidance Hike
Zscaler ZS shares popped 20.6% on Monday after the zero-trust cybersecurity specialist reported preliminary results for the third quarter of fiscal 2023, which surpassed its guidance range. Additionally, the company raised guidance for the full-fiscal 2023, thereby boosting investors’ confidence in the stock.
Based on its preliminary review, Zscaler expects to report third-quarter revenues between $415 million and $419 million, higher than its previous guidance range of $396-$398 million. The company also predicts to report a 38%-39% year-over-year increase in third-quarter calculated billings and reach the $478-$482 million band. The Zacks Consensus Estimate for third-quarter revenues is pegged at $397.8 million.
Furthermore, ZS now projects to report non-GAAP income from operations in the range of $60-$64 million instead of the earlier forecast in the band of $55-$56 million. On a GAAP basis, it anticipates reporting a loss from operations in the range of $55-$59 million.
Zscaler didn’t provide any update on non-GAAP earnings per share (EPS). However, considering higher revenue and operating income preliminary results, we believe that the third-quarter non-GAAP EPS will come way higher than the company’s expectations of 39 cents per share. The consensus mark for the third-quarter non-GAAP EPS currently stands at 39 cents per share.
Zscaler will report its third-quarter fiscal 2023 results on Jun 1.
Zscaler, Inc. Price and EPS Surprise
Zscaler, Inc. price-eps-surprise | Zscaler, Inc. Quote
Buoyed by the expectations of stronger third-quarter results, Zscaler raised guidance for the full-fiscal 2023. The company now projects revenues between $1.587 billion and $1.591 billion, up from the previous forecast in the band of $1.558-$1.563 billion. Calculated billings are now anticipated in the range of $1.97-$1.974 billion instead of the $1.935-$1.945 billion band forecast previously.
It now projects non-GAAP income from operations in the range of $220-$224 million, up from the earlier guidance in the range of $213-$215 million. The company didn’t update its non-GAAP EPS guidance. During second-quarter results, it forecast fiscal 2023 non-GAAP EPS to come between $1.52 and $1.53.
Zscaler’s upbeat guidance for fiscal 2023 reflects the continued solid demand for its security and networking products, given the healthy environment of the global security market. The solid adoption of its in-cloud security platform, Zero Trust Exchange, due to the ongoing digital transformation across enterprises is acting as a key catalyst.
Additionally, with hybrid work being normal at present, an increasing number of people have been logging into employers' networks through off-premises locations, which has triggered the need for greater security. This trend is fueling the demand for Zscaler’s products.
Moreover, ZS’ existing core products, especially the Zscaler Internet Access and the Zscaler Private Access, have been driving customer retention. The addition of new capabilities to its Zero Trust Exchange, such as Cloud Access Security Broker, Cloud Browser Isolation, Cloud Protection, Zscaler Digital Experience and Cloud Security Posture Management for Software-as-a-service applications, has been driving its product portfolio expansion and aiding customer acquisition.
Zacks Rank & Other Stocks to Consider
Currently, Zscaler carries a Zacks Rank #2 (Buy). Shares of ZS have declined 3.6% year to date (YTD).
Some other top-ranked stocks from the broader technology sector are Meta Platforms META, Manhattan Associates MANH and Wix.com WIX. While Meta and Manhattan Associates each sport a Zacks Rank #1 (Strong Buy), Wix.com carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Meta's second-quarter 2023 earnings has been revised 36 cents northward to $2.79 per share in the past 30 days. For 2023, earnings estimates have been revised 12.6% upward to $11.76 per share in the past 30 days.
Meta’s earnings beat the Zacks Consensus Estimate twice in the preceding four quarters while missing the same on two occasions, the average surprise being 15.5%. Shares of META have surged 93.4% YTD.
The Zacks Consensus Estimate for Manhattan Associates' second-quarter 2023 earnings has been revised upward by a couple of cents to 72 cents per share for the past 30 days. For 2023, earnings estimates have moved upward by 17 cents to $2.87 per share in the past 30 days.
Manhattan Associates' earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 33.6%. Shares of MANH have soared 39.5% YTD.
The Zacks Consensus Estimate for Wix.com’s first-quarter 2023 earnings has been revised upward to 23 cents per share from 16 cents per share 60 days ago. For 2023, earnings estimates have been revised northward by 7 cents to $1.49 per share in the past 60 days.
Wix.com's earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while missing the same on one occasion, the average surprise being 225%. Shares of WIX have increased 1.5% YTD.
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