Wall Street Bulls Look Optimistic About Zscaler (ZS): Should You Buy?

Zscaler (ZS) currently holds an average brokerage recommendation (ABR) of 1.55, approximating a 'Buy' rating based on input from 40 brokerage firms, with 70% recommending a 'Strong Buy'; however, the article suggests that investors should not rely solely on ABRs due to potential biases from brokerage firms. Instead, the article promotes the Zacks Rank, which is based on earnings estimate revisions; the Zacks Consensus Estimate for Zscaler's current year has increased 4.1% over the past month to $3.07, resulting in a Zacks Rank #2 (Buy) for the stock.

Analysis

Zscaler (ZS) currently garners significant optimism from Wall Street, reflected in an Average Brokerage Recommendation (ABR) of 1.55 on a 1-to-5 scale, with 28 out of 40 brokerage firms assigning a "Strong Buy" and two a "Buy," accounting for 70% and 5% of recommendations respectively. While this ABR approximates a Strong Buy to Buy rating, the article advises caution, highlighting potential inherent positive biases in sell-side analyst recommendations. Instead, it emphasizes the Zacks Rank, a quantitative model based on earnings estimate revisions, as a more reliable predictor of near-term stock performance. Notably, Zscaler's Zacks Consensus Estimate for current-year earnings per share (EPS) has increased by 4.1% over the past month to $3.07. This upward revision, indicative of growing analyst confidence in the company's earnings prospects, has resulted in Zscaler achieving a Zacks Rank #2 (Buy), suggesting a positive outlook for the stock in the near term.

Key Decisions for Investors

• Investors should note the strong bullish consensus for Zscaler, particularly the Zacks Rank #2 (Buy) which is underpinned by a 4.1% increase in the current year's Zacks Consensus EPS estimate to $3.07 over the past month.
• Consider the Zacks Rank as a potentially more reliable indicator than the Average Brokerage Recommendation, given the article's discussion on potential sell-side biases, when evaluating Zscaler's near-term prospects.
• While the combination of a favorable ABR and a Zacks Rank #2 (Buy) suggests positive momentum, investors should integrate this with their own research and risk assessment before making investment decisions regarding Zscaler.