Jun 28, 2024

Cybersecurity stocks were higher on Thursday after Bloomberg Intelligence projected demand for cloud security as more companies seek to train their AI models.

ZS-–-Daily-ChartZS – Daily Chart

Zscaler has a resistance level of $195, which could open up a retest of $260. The all-time high was set at $376.11 and was set in late-2021.

Zscaler (ZS) was up more than 5% to lead gainers in the Nasdaq 100, while Palo Alto Networks (PANW) closed up more than 4%. Fortinet (FTNT) and Crowdstrike Holdings (CRWD) were up 3% and 1%.

Cybersecurity was also in the headlines this week as 15,000 car dealerships across the US and Canada were taken offline by a cyberattack on CDK Global. The company is one of only a few dealer management system providers that help auto retailers access customer records, schedule appointments, book repairs, and complete transactions. After the cyber ransom event, the dealers were forced to resort to pens and paper.

Cybersecurity stocks were also boosted by BlackBerry’s earnings, which showed improvement in the company’s offerings. BlackBerry saw positive trends in key growth indicators, including net retention rate and annual recurring revenue. The results were positive for the demand outlook of cybersecurity solutions.

JP Morgan has a positive outlook on Zscaler, with analyst Brian Essex saying: “We view current levels as an opportunity to own a leading Zero Trust vendor with favorable market exposure, well positioned to inflect to better growth in [the second half of 2025], currently trading at a discount to high growth peers and historical valuation levels”.

Essex likes Zscaler’s position within the cybersecurity sector, as it’s well situated to what executives see as worthwhile from a spending perspective. The company should “benefit from the migration of compute from on premise environments to cloud environments, as the global threat environment continues to accelerate,” he added.

Zscaler’s shares are down 17% year-to-date, but Crowdstrike has improved by over 50%. On a valuation outlook, Zscaler is priced at 14X sales, similar to PANW, while FTNT is valued at 8.5x sales.

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