By Angela Palumbo

A BofA Securities analyst on Friday upgraded Zscaler stock after several days of gains during a troublesome time for tech investors.

Madeline Brooks boosted her rating on Zscaler to Buy from Neutral and raised her price target on the stock to $240 from $215, implying a 19% increase from Thursday's $202.16 close.

"We believe that Zscaler is positioned to gain share in the market's migration to cloud-based security solutions," Brooks wrote. "Its scalable, purpose-built software platform also enables it to move into new security markets."

Zscaler is a cloud-based internet security platform provider. The company's second-quarter earnings and revenue, reported March 5, were better than expected, and the company's financial guidance for the year came in above Wall Street's consensus estimate. On the earnings call, Chief Executive Jagtar Chaudhry said that the growing adoption of artificial intelligence is "driving demand across multiple dimensions, including data protection and our AI-powered security products."

"With the company showing good signs of successful diversification, solid order growth and improvement in upsell capabilities, we are upgrading from Neutral to Buy," Brooks wrote.

The stock has gained 11% this year compared with the 7.8% decline of the tech-heavy Nasdaq Composite index. Tech stocks have come under pressure in recent weeks as investors take a more risk-off approach amid economic uncertainty, specifically due to the Trump administration's shifting headlines on tariffs.

Zscaler management said on its earnings call that it doesn't believe tariffs will have an impact on the business.

Zscaler shares are expensive by traditional valuation metrics, trading at 60 times earnings expected over the next 12 months. Of the 45 analysts surveyed by FactSet, 28 rate Zscaler stock a Buy and 17 a Hold. There are no Sell ratings, according to FactSet.

"The company's unique and innovative approach to security targets a well-defined $96BN total addressable market, not including potential adjacent market expansion opportunities," Truist Securities analyst Joel Fishbein, who rates the stock a Buy with a $260 price target, wrote in a note after earnings. He thinks the company stands to grow revenue by about 20% on average over the next few years while also expanding margins in the long term.

Write to Angela Palumbo at angela.palumbo@dowjones.com

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March 07, 2025 13:47 ET (18:47 GMT)

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