Zscaler stock leads cybersecurity rally as most bullish analyst doubles down

Zscaler Inc. shares led strong gains in the cybersecurity sector Monday after the company’s most bullish analyst doubled down on his investment thesis.

Zscaler ZS, +8.44% shares rallied 8.1% to $59.47 in recent activity, following an intraday high of $59.58. Shares are up nearly 28% since the beginning of 2020.

In a note Monday, Needham analyst Alex Henderson, who has a “strong buy” rating and a claims the most bullish Wall Street price target of $89, said he “came away with renewed confidence” following a recent visit to the company.

“Zscaler is one of our top recommendations in Cloud Direct Zero Trust Security, which we believe is the critical requirement for future security architectures,” Henderson said. “Zscaler has the best platform for Zero Trust, integrates tightly with Cloud Direct, and is core to delivering Digital Transformation implementations, in our view.”

The analysts also played down competition in the cloud-security space from Palo Alto Networks Inc.PANW, +1.29%, noting “we see no evidence of pressure from Palo Alto and strongly believe Palo’s architecture is incapable of competing with Zscaler.”

In addition to Zscaler, Henderson sees core positions in cloud-based security as being CrowdStrike Holdings Inc. CRWD, +3.86%, Okta Inc. OKTA, +2.55%, Cloudflare Inc. NET, +5.78%, Mimecast Ltd. MIME, -0.66%, and Proofpoint Inc. PFPT, -0.16% 

Of the 22 analysts who cover Zscaler, 11 have buy or overweight ratings, 10 have hold ratings and one has a sell rating, along with an average price target of $62.63, according to FactSet data.

Also on Monday, Zscaler said it was a finalist in the Microsoft Corp.’s MSFT, +1.02% Security 20/20 partner awards for the “ISV Partner of the Year” and “Customer Impact” categories.

Cybersecurity stocks as a whole were outperforming the broader market on Monday. The ETFMG Prime Cyber Security ETF HACK, +1.34% rose 1.3%, while the S&P 500 index SPX, +0.57% was up 0.5%, and the tech-heavy Nasdaq Composite Index COMP, +0.91% was up 0.8%.

In fact, cybersecurity has been outperforming broader indexes for the year so far a following heightened concerned about cyberattacks from Iran following the U.S. airstrike that killed the country’s top general Qassem Soleimani. So far in 2020, the HACK index is up 5.5%, compared with a 1.6% rise in the S&P 500 and a 3.1% advance in the Nasdaq.

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