Long Trade Idea
Enter your long position between $125.66 (an intermediate horizontal support level) and $132.07 (yesterday’s intra-day high).
Market Index Analysis
Zscaler (NASDAQ:ZS) is a member of the NASDAQ 100 Index.
This index trades near all-time highs with rising bearish catalysts and worsening macroeconomic headwinds.
The Bull Bear Power Indicator for the NASDAQ 100 Index is bearish with a descending trendline.
Market Sentiment Analysis
Equity futures are moving higher, building on yesterday’s advance following Friday’s one-day plunge. AI is leading the way again, boosted after Marvell Technology’s (NASDAQ:MRVL) inclusion into the S&P 500 and OpenAI’s announcement that it has taken the first step towards its IPO. Inflationary pressures continue amid the war in Iran, while the SpaceX IPO is oversubscribed, with $150 billion in orders for $75 billion in shares, and worries over a potential market top have increased because of the blockbuster listing.
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Zscaler Fundamental Analysis
Zscaler is a cloud-based cybersecurity company. It continues to make small but strategic acquisitions to grow its product and services portfolio, including international ones.
So, why am I bullish on ZS despite its massive post-earnings plunge?
Zscaler beat revenue and earnings per share expectations, reporting $850.48 million and $1.08, respectively, versus $835.14 million and $1.01. Still, shares plunged over 30% amid weaker-than-expected guidance, falling short by at least 300 basis points. I view it as an excellent buying opportunity driven by the number of $1 million+ deals, a record $3.5 billion in annual recurring revenue (ARR), and Project AI-Guardian, a global ecosystem with significant Global System Integrators (GSIs) to deploy Zscaler’s AI security suite.
Metric | Value | Verdict |
P/E Ratio | 28.49 | Bullish |
P/B Ratio | 8.94 | Bearish |
PEG Ratio | 1.42 | Bullish |
Current Ratio | 1.86 | Bullish |
ROIC-WACC Ratio | Negative | Bearish |
Zscaler Fundamental Analysis Snapshot
The forward price-to-earnings (P/E) ratio of 28.49 makes ZS an inexpensive stock. By comparison, the P/E ratio for the NASDAQ 100 Index is 35.69.
The average analyst price target for ZS is $193.79. This suggests excellent upside potential with falling downside risks.
Zscaler Technical Analysis
Today’s ZS Signal
Zscaler Price Chart
The ZS D1 chart shows price action approaching a horizontal support zone.
It also shows price action below its ascending Fibonacci Retracement Fan.
The Bull Bear Power Indicator is bearish with an ascending trendline.
The average bullish trading volumes are higher than the average bearish trading volumes following the one-day 30%+ plunge.
ZS corrected more than the NASDAQ 100, a bearish signal, but bullish catalysts are rising.
My ZS Long Stock Trade
ZS Entry Level: Between $125.66 and $132.07
ZS Take Profit: Between $173.79 and $181.88
ZS Stop Loss: Between $103.62 and $109.90
Risk/Reward Ratio: 2.18
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