Time for Bulls to Jump on Zscaler Stock

The cloud name has outperformed the S&P this year

Feb 12, 2019 at 9:26 AM
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Cloud security name Zscaler Inc (NASDAQ:ZS) has had a strong start to 2019 -- up 23.6% so far, compared to a slimmer 8% gain for the S&P 500 Index (SPX). There's plenty of skepticism priced into the stock, too, which could keep the wind at ZS' back as it's unwound.

zs daily chart feb 8

For starters, seven of 11 analysts maintain a "hold" or "worse" recommendation on the stock, while the consensus 12-month price target sits at $44.75 -- below current trading levels. This leaves the door open for upgrades and/or price-target hikes, which could draw more buyers to the table.

Plus, short interest surged 49% in the two most recent reporting periods to 8.29 million shares. This accounts for a healthy 14% of ZS' available float, and would take more than six sessions to cover, at the average daily pace of trading.

Lastly, short-term options are relatively cheap at the moment, too, per the stock's Schaeffer's Volatility Index (SVI) of 50% -- indicating implied volatilities are near the lowest they've been since ZS began trading last March.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this ZS commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

 

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