12:27 PM EDT, 08/26/2024 (MT Newswires) -- Zscaler's ( ZS ) stock has lagged behind similar stocks this year due to concerns about long-term competition and recent sales organizational changes, however, this underperformance might improve with the company likely to report a "solid" fiscal Q4, Morgan Stanley said in a note Monday.

The analysts said positive factors include favorable data and achievable estimates, and a stable competitive position. Recent changes in the company's sales organization, including new hires for key roles, may cause short-term disruptions and higher sales staff turnover. The management has acknowledged these risks, and expected billings growth for fiscal 2025 has been adjusted to about 20% year-over-year, with new billings down 5% year-over-year.

For fiscal 25, the analysts expect management to forecast billings growth of around 19% to 20% year-over-year as there might be sales disruptions from the recent chief revenue officer transition. Billings growth is expected to slow to the high teens in H1, then improve to over 20% in H2. The free cash flow margin is set to drop to around 23% due to increased hiring and higher network capital expenditures that were delayed from fiscal 2024 to 2025.

Morgan Stanley raised its price target on Zscaler ( ZS ) to $215 from $202 while maintaining its equalweight rating.

Price: 198.82, Change: -0.61, Percent Change: -0.31