Zscaler could be an ideal cybersecurity stock with long-term prospects

Irrespective of the products or services they offer, tech companies have been, over the past two years, widely adopting cloud technology, thanks to the reliability and convenience it offers. This trend should continue in the coming years, as more industries make use of this technology.  

And this will increase the risks of data hacks, laying fertile grounds for the growth of cybersecurity firms. So if you are a tech investor looking at long-term prospects, cybersecurity is one area that you should definitely consider.

Zscaler (NASDAQ: ZS) has been doing pretty well since its IPO in March last year. The market optimism is evident in the stock movement: ZS stock has more-than-doubled in the trailing 12 months.

Last month, the San
Jose, California-based firm reported a 61%
jump in revenues to $79.1 million.
On the other hand, it did report a wider loss, but the company has been pretty
transparent on what its short-term priorities are.

CFO Remo Canessa reiterated the company’s focus during the earnings conference call, where he said, “I would emphasize that our plans are not to maximize profitability or generate additional operating leverage in the near term, but to invest aggressively in our business to pursue our significant market opportunity. We plan to continue to invest in our sales organization and marketing programs as well as increased investments in our technology platform and cloud infrastructure.”

Zscaler is a decade-old security-as-a-service company, that focuses on inspection and security of information within cloud infrastructures. It does away with the need for on-site security devices.

READ: Things to know as Crowdstrike makes a scintillating market debut

The company has consistently delivered significant top-line growth (see IG) in the past one year as a public company. Zscaler estimates its addressable market for this calendar year at around $20.3 billion. The company operates around the globe, though half of the revenue comes from the US. EMEA is the second biggest market, accounting for around 40% of total revenue.

Apart from the
consistent operational performance, the company ‘s expansion strategy includes
adding to its kitty smaller security companies that show promise. Earlier this
month, the company announced an agreement with NTT Communications Corporation to
deliver cloud-based internet and web security that scales to all users,
regardless of location, enabling enterprises to securely embrace the cloud.

The company has also made a silent but significant acquisition of Appsulate, a developer of next-generation browser-based access technology. Similarly, Zscaler last year acquired AI-based stealth security startup TrustPath for an undisclosed amount. These deals are expected to help Zscaler expand its operations and maintain the staggering topline growth at a steady pace.

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