The technology sector is one of the most unforgiving sectors for most of this year. Interestingly, most of the tech stocks tasted record lows, with Nasdaq shading over 4.8% of value. In the same breath, Zscaler, Inc. (NASDAQ:ZS) value threatening doldrums.
Since the release of the financial results for the third quarter 2018, the stock is gaining momentum.
Zscaler is price stable
Interestingly, this is after difficult moments in August that, as earlier mentioned, affected the whole market. The relative strength index (RSI) for the stock stood above 50 all the while. This is an indication that despite the tumultuous market, Zscaler has remained strong. Particularly, the RSI value at present is 57.34.
Usually, values above 70 indicate a share that has high momentum. This is to say that there is a lot of action concerning the stock. Investors are buying the stock in large numbers. Further, this could indicate an overbought situation for a share.
On the other hand, values below 30 indicate subdued momentum for the stock. Further, it indicates an oversold situation for the stock. However, since the RSI value for ZS is 57.34. Therefore, it is clear that the share price for ZS is very stable, which is a good sign for holding.
Further, it is important to establish whether the stock price is volatile. Normally, a volatile stock harbors a lot of risk. As such, only investors with a high risk appetite can dare touch such stocks.
The average true range (ATR) helps to establish the degree of volatility by a stock. In this case, the ATR value for is 2.661. Normally, the ATR moves with high price movements in either direction. As such, the values indicate the degree of volatility by how steep the graph moves. Given the recent sharp movement in the price of the stock, it is safe to say the price is volatile.
Further, the share price is performing strongly given the 50-day moving average. At present, the share price enjoys support at $37.44. Interestingly, this price is more than 100% of the 1-year low that the price sunk to mi-November 2018. In essence, the price has a strong upside which guarantees further growth.
In the earnings report for Q1 FY 2019, the firm reported a non-GAAP earnings of 1 cent for every share. Interestingly, this is against the consensus expectation of a loss of 5 cents per share. It is easy to spot the huge potential for the share’s growth when compared to the same EPS in Q1 FY2018.
The Q1 FY2019 by almost all measures. Particularly, the company’s revenue year over year surged $63.3 million. Interestingly, the measure surpasses the consensus estimate of $59 million.
Further, the firm maintained a healthy balance sheet with a low level of unsold assets in possession. This way, it means the firm’s net worth is quite high considering that it has no debt. This makes it easy for cash and other short term assets to cover short term commitments.
Despite the firm being loss making at the moment, it has cash runway that suffices for three year operations. This will however depend on their ability to keep the free cash flow level constant. Interestingly, the cash runway can still cover 3 years even with a slight shrink in free cash flow.
Recent moves by the firm indicate that it could experience further growth in future. In particular, it could finally begin to turn up a profit. Particularly, a press release reveals that Zscale is “one of four cloud service providers selected to pursue Joint Authorization Board (JAB) FedRAMP certification, at the High Impact level, through the FedRAMP Connect program.”
As such, Zscale’s growth within the Federal is market is almost certain.