Where Will Zscaler Stock Be in 1 Year?

Core Viewpoint - Zscaler, a cloud-based security company, is experiencing a slowdown in growth and faces challenges in the current macroeconomic environment, leading to a potential stabilization or decline in its stock price over the next 12 months [2][8]. Company Performance - Zscaler's calculated billings grew at a compound annual growth rate (CAGR) of 51% from fiscal 2018 to fiscal 2023, while revenue rose at a CAGR of 53% [3]. - For the full year, Zscaler expects calculated billings to rise by 28% and revenue by 32%, with analysts projecting a 23% revenue growth for fiscal 2025 [4]. - Adjusted earnings per share (EPS) are expected to grow by 67%-68% for the full year, surpassing analysts' expectations of 64% growth, but only 13% growth is anticipated for fiscal 2025 [5]. Market Position and Challenges - Zscaler remains unprofitable on a GAAP basis since its IPO, with expectations of profitability not occurring until fiscal 2026 [6]. - The company has seen a stock decline of over 20% year-to-date, with insiders selling nearly 10 times as many shares as they bought in the past 12 months [7]. Growth Metrics - Zscaler's calculated billings growth year-over-year is projected to decrease from 40% in Q3 2023 to 30% in Q3 2024, while revenue growth is expected to decline from 46% to 32% in the same period [11]. - Despite the cooling growth, adjusted gross margin remained steady at 81%, and adjusted operating margin expanded by 7 percentage points to 20% due to tighter cost controls [11]. Valuation Concerns - Zscaler's stock is currently valued at 52 times its forward adjusted earnings and 10 times next year's sales, indicating limited upside potential at these levels [12].