We recently published an article titled, Jim Cramer’s Latest Lightning Rounds: 15 Stocks to Watch. In this article, we are going to take a look at where Zscaler, Inc. (NASDAQ:ZS) stands against other stocks discussed by Jim Cramer during the latest lightning rounds.
Recently on Mad Money, host Jim Cramer stressed the necessity of staying updated on economic indicators, government actions, and industry developments to make informed investment choices. He emphasized that speculation should be approached with the mindset of a “pro” rather than a novice. Cramer mentioned that while he does not oppose speculation, it must be done with an understanding of the risks involved. He remarked:
“Otherwise, if things go south, you’ll be caught playing a game of endless musical chairs, led by me getting a huge number of lightning round calls about some very sketchy outfits that all belong to what I call the hot money segment.”
Cramer provided insight into this hot money segment, describing it as a segment with limited capital that cannot satisfy all the demand. He specifically pointed to China, explaining that the current policies from the Chinese government have created an environment where, for the moment, it seems nearly impossible to incur losses. He elaborated that the government is actively subsidizing stock purchases and promoting buybacks and insider buying through liquidity support.
It has led to significant price movements in the market. When considering investments in Chinese stocks, Cramer advised caution, suggesting that investors should focus on companies capable of withstanding market fluctuations. He pointed out that many people are tempted to buy Chinese auto stocks, especially given their impressive advancements in electric vehicle technology. Nonetheless, he warned that the electric vehicle market is becoming increasingly saturated.
Cramer added that with the limited amount of hot money available, speculative stocks now face competition from cryptocurrencies. He expressed his belief that Bitcoin and Ethereum are the only cryptocurrencies with a good chance of recovery, dismissing most others as “junk”.
He shared that he only invests in these two digital currencies and avoids common stocks tied to the cryptocurrency market, deeming them too risky compared to Bitcoin and Ethereum, which benefit from exchange-traded products backing them. Cramer concluded by mentioning that speculation should be done wisely, saying, “With any speculative trade, there’s a beginning and an endpoint.”
Our Methodology
For this article, we compiled a list of 15 stocks that were mentioned by Jim Cramer during the lightning rounds of his episodes of Mad Money on October 4 and October 7. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Cramer Says Zscaler, Inc.’s (NASDAQ:ZS) CEO Is Doing An Okay Job
Zscaler, Inc. (NASDAQ:ZS)
Number of Hedge Fund Holders: 45
Zscaler, Inc. (NASDAQ:ZS) is a cloud security company that provides a suite of solutions designed to offer secure access for users and devices in a digital environment. Among its key offerings is Zscaler Internet Access, which enables secure connections to externally managed applications. Its Zscaler Private Access facilitates safe access to internal applications that reside in both data centers and cloud environments. The company’s Posture Control solutions focus on safeguarding data within public cloud frameworks, while its Cloud Infrastructure Entitlement Management prioritizes identity and privilege access management.
When asked about the stock, Cramer said, “I think Jay Chaudhry’s doing an okay job.” He mentioned that he likes Palo Alto and CrowdStrike better.
However, it is worth noting that, on October 5, Citi maintained its Buy rating on the stock and lowered the price target on Zscaler (NASDAQ:ZS) to $230 from $240. The firm made a note of the negative sentiment surrounding the company, along with execution risks anticipated in the latter half of the year, which has created a cautious outlook.
Citi started a “90-day positive catalyst watch” on the shares. Against a backdrop of lowered expectations and a discounted valuation, the firm maintains that it has confidence in its rating for the company.
In fiscal 2024, Zscaler (NASDAQ:ZS) reported revenue of $2.167 billion, a substantial 34% increase from the previous fiscal year. The figure not only surpassed management’s guidance of $2.141 billion at the midpoint but also highlights the company’s growth trajectory, as the guidance was raised three times during the year.
Management estimates that the company has an addressable market estimated of $96 billion. During the latest earnings call, CEO Jay Chaudhry emphasized the strong demand for the company’s zero-trust security solutions and commented that advancements in generative artificial intelligence are opening up new growth opportunities.
Overall, ZS ranks 3rd on our list of stocks discussed by Jim Cramer during the latest lightning rounds. While we acknowledge the potential of ZS as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ZS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
