Amid a soft session on Wall Street as investors digest the weekend attack against Israel, Zscaler (NASDAQ:ZS) enjoyed robustly positive action. Primarily, Barclays analysts led by Saket Kalia are pounding the table on ZS stock, calling the underlying cloud security enterprise a market leader. It also doesn’t hurt that recent high-profile cyberattacks have pushed the case for increased (or at least sustained) information technology (IT)-related expenditures.
According to a Seeking Alpha report, Barclays upgraded ZS stock to “overweight” from “equal weight.” As well, the financial institution’s analysts raised the price target to $190 from $176. Specifically, the experts like the growth opportunity in secure access service edge or SASE. They anticipate that this segment could rise to the same prominence as network security in calendar year 2026.
Based off estimates from research firms Gartner and IDC, Barclays pointed out that the total addressable market for SASE stands between $5 billion and $9 billion. Further, the segment should enjoy growth at a rate between 20% and 35% through 2026.
“Given SASE’s growth profile and ability to become one of the biggest sub-segments in the security market, we want more exposure to this market, and we think Zscaler is a leader,” Kalia and the Barclays team stated in their research note.
High-Profile Incidents Underscore the Vitality of ZS Stock
While ZS stock represented a top winner to start the Street’s proceedings this week, investors should note that the sentiment appears largely isolated to the open market. In the derivatives arena, the smart money doesn’t seem particularly impressed with Barclays’ upgrade.
Specifically, Fintel’s options flow screener — which exclusively targets big block transactions likely made by institutions — shows two major transactions, both for bought put options. Specifically, traders acquired 611 contracts of the Oct. 20, 2023 $157.50 put and 880 contracts of the Oct. 20, 2023 $155 put. No other big block trades materialized for ZS stock at time of writing.
Nevertheless, these puts will expire next Friday. From a longer-term perspective, the framework for ZS stock appears positive. For example, Grand View Research notes that the global SASE market reached a valuation of $665.9 million in 2020. However, the sector could hit revenue of $11.29 billion by 2028, representing a compound annual growth rate (CAGR) of 36.4% from 2021 to the end of the forecast period.
As well, recent high-profile cybersecurity incidents underscore the importance of running a tight IT ship. Just recently, Clorox (NYSE:CLX) revealed the extent of the financial damage that an August breach caused. Essentially, attempting to save money on digital security may lead to devastating consequences, cynically bolstering the case for Zscaler.
Why It Matters
Overall, TipRanks reports that the analyst consensus for ZS stock comes in as a moderate buy. This assessment breaks down as 20 buys, seven holds and zero sells. However, the average price target lands at $182.56, implying less than 7% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
