Robert Way
Zscaler (NASDAQ:ZS) fell slightly more than 1% on Wednesday after being initiated at KeyBanc Capital Markets with a Sector Weight rating.
It’s simply too expensive, analysts Eric Heath and Billy Mandl wrote in a note.
The bank’s nonetheless positive on the market for Secure Access Service Edge, or SASE, cloud models, but competition is increasing and shares are fairly valued.
Zscaler will have 20%-plus share of the market, but the company hasn’t seen much success expanding beyond that.
“The network security industry is undergoing a fundamental shift from a traditional hub-and-spoke, firewall-based architecture to a zero-trust, distributed, local-breakout architecture with SASE,” the analysts said.
The SASE market is set to grow 27% to $28B in 2027 and competition will increase from the likes of Microsoft (MSFT), Fortinet (FTNT), Cisco (CSCO), Checkpoint (CHKP) and Cloudflare (NET).
“We see management, while optimizing for profitable growth, prioritizing growth over margin expansion going forward,” the analysts said.
The stock has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Seeking Alpha’s quant system, which consistently beats the market, rates the stock a HOLD.
Image and article originally from seekingalpha.com. Read the original article here.