Zscaler (ZS) shares have a positive setup into next week's earnings as expectations look manageable, April demand checks improved, artificial intelligence security demand could rise, and federal contract activity may help bookings, UBS said in a note emailed Wednesday.
The investment firm said it remains positive on the stock, which it views as undervalued, as investor sentiment has improved from a few months ago, although Zscaler shares are still down 22% year to date, compared with an 8% gain for cybersecurity stocks.
April industry checks were stronger than March, with partners pointing to more urgency from enterprise customers, while Zscaler's Z Flex contracts could help customers adopt AI security products faster, including data security tools, UBS said.
UBS kept its buy rating and $260 price target for Zscaler, saying that a recent Department of Homeland Security contract and stronger Recovery Point Objective trends could support H2 revenue visibility.
Zscaler will release its fiscal Q3 results next Tuesday.
Price: $174.06, Change: $-1.19, Percent Change: -0.68%