We recently published a list of 10 Best AI Stocks for the Second Half of 2024. Since Zscaler Inc (NASDAQ:ZS) ranks 10th on the list, it deserves a deeper look.
Wedbush Securities in a fresh note said mega-cap tech stocks have a 15% upside in the second half of 2024, driven by AI. Wedbush analyst Dan Ives, who has been beating the AI drum and thinks the AI “party” is just getting started, wrote that the $4 trillion AI arms race is between major tech players and GPU chips have become the new oil or gold in the tech industry.
Ives wrote that he thinks NASDAQ will have another strong second half of the year.
“Tech stocks will be up 15% the rest of 2024 in our view with tech fundamentals set to accelerate as AI use cases materially expand.”
While Ives continues to see the major tech stocks leading the AI market, he thinks the AI-led rally can broaden out to tech companies who have strong “installed” bases which can actually use generative AI applications and models.
Last month, while talking to CNBC, Ives said that the tech bull market is going to last for at least two more years. When asked what could be the threat to this bull run, Ives said that China could be a threat amid a possibility of “tech cold war” but he thinks that is a “contained threat.”
“It started off with the semis, but now it’s started to happen is, the demand and the use cases” are expanding to other companies. Ives called the AI boom the “fourth industrial revolution.”
We picked top AI stocks from Wedbush’s latest note. The firm named some of these stocks as the best picks for the second half of 2024 while called others “oversold” tech stocks. With each stock we have mentioned the number of hedge fund investors. 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).
A close-up of a stock market ticker displaying the company’s stocks.
Zscaler Inc (NASDAQ:ZS)
Number of Hedge Fund Investors: 39
Dan Ives of Wedbush thinks Zscaler Inc (NASDAQ:ZS) is one of the top AI picks for the rest of 2024. Other Wall Street analysts are also turning bullish on Zscaler Inc (NASDAQ:ZS).
Recently, Baird talked about Zscaler Inc’s (NASDAQ:ZS) Zenith Live event and highlighted the company’s new products and expanding total addressable market.
Baird analyst Shrenik Kothari said in a note that Zscaler Inc (NASDAQ:ZS) unveiled new features including machine learning-powered identity protection and cloud browser-isolation feature as well as AI-driven content inspection. These features, according to Kothari, target an expanded $96 billion total addressable market. The analyst set an Outperform rating and a $260 price target on the stock.
Analysts believe Zscaler Inc’s (NASDAQ:ZS) Zero Trust Exchange platform has strong growth catalysts amid the rise in demand for online security solutions. The platform offers reduced attack surface and increased inspection and AI-driven threat detection. It removes the need for network segmentation and multiple-point products.
While Zscaler Inc (NASDAQ:ZS) is still a loss-making company (it’s profitable on a normalized basis) most of its losses are due to stock-based compensations, which is important to attract top talent. Zscaler Inc’s (NASDAQ:ZS) P/S ratio of 14.22 is about 42% less than its five-year average. In May, ZS upped its revenue guidance for the third straight quarter. Wall Street expects Zscaler Inc’s (NASDAQ:ZS) revenue to grow 22% next year and earnings to rise by 26.81% each year over the next five years on a per-annum basis.
Overall, Zscaler Inc (NASDAQ:ZS) ranks 10th on Insider Monkey’s list titled 10 Best AI Stocks for the Second Half of 2024. While we acknowledge the potential of Zscaler Inc (NASDAQ:ZS), 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 Zscaler Inc (NASDAQ:ZS) but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These Stocks.
Disclosure: None. This article is originally published at Insider Monkey.
