An in-depth look at its rapid upside potential

For a stock that was just starting to experience what felt like a 200% rally, last month was certainly a wake-up call for Zscaler Inc NASDAQ: HP. After catching the wave of risk appetite that began to sweep stock markets in November, cybersecurity technology stocks were unable to maintain momentum until the end of the first quarter. This came even as the broader market, and other technology stocks in particular, continued to post gains.

Sure, the benchmark S&P 500 index is currently experiencing its worst sell-off of the year, as inflation threatens to return, but that started just three weeks ago. Zscaler’s 35% decline since the start of February serves as a reminder to investors: Just as tech stocks can outperform the market in a rally, they can undoubtedly outperform it in a sell-off.

However, with Zscaler stock’s Relative Strength Index (RSI) around 20, indicating extremely oversold conditions, the question must be asked: could we be looking at the mother of all entry opportunities?

Reasons to be bullish

Beyond the technical indicators supporting this thesis, there are the fundamentals to consider. Zscaler beat analysts’ expectations for second-quarter earnings last month, reporting both record revenue and earnings per share. The company also strengthened its full-year guidance, beating consensus; something in itself is usually enough to spark a fiery rally.

But instead, Zscaler stock continued to decline and fell to a new low during Friday’s session. This not only reversed much of the recovery rally that had been going on since May last year, but also brought them back to 2020 levels.

However, while the tape may be telling its own story, Wall Street analysts don’t believe it. Since early last month, there has been a series of bullish analyst updates, comments and price targets on the stock that all point to upside potential that only grows.

Running analyst updates

Take JMP Securities, for example, which, in the aftermath of Zscaler’s breakout earnings, reiterated its Market Outperform rating and gave the stock a price target of $270. Rosenblatt Securities took a similar stance, only with a target of price of 290 dollars. As Zscaler shares continued to fall in the following weeks, teams at Robert W. Baird, Truist, Macquarie, and KeyCorp all joined the bullish camp, and all have price targets well above $200.

For those of us on the sidelines, this offers an interesting pause for thought. Zscaler shares closed last week below $170; compared to Rosenblatt’s price target of $290, this indicates a 70% upside. By taking even one of the most recently updated price targets, such as KeyCorp’s $220 last Thursday, investors can aim for at least 30% gains in the near term.

Getting involved

With both technical indicators and strong fundamental performance underlying these lofty price targets, there is a lot to like about Zscaler right now. There’s no doubt that the stock has gotten caught up in the risk-off sentiment that is chipping away at stocks’ monthly gains in just a few weeks, but this is a tech stock that can actually point to some truly impressive growth and momentum all around. the right points. If nothing else, consider this: Since Zscaler first traded at these prices in 2020, its revenues have more than quadrupled, posting consistent quarter-over-quarter growth.

In terms of choosing a starting point, those of our readers considering a position should wait for a strong earnings day to start a fund. If Zscaler stock could begin to consolidate above that low, if not even start an immediate recovery rally, we could be looking at a reasonably strong entry opportunity to exploit.

Before considering Zscaler, you’ll want to hear it out.

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