Not so tough if you use volatility as your friend, and follow the numbers. Palo Alto’s numbers were very much like Crowdsource’s numbers. While the stock price went up and down the numbers never did for Palo Alto.
The problem we have with Crowdsource is that the valuation multiples are now higher for the same numbers than they were for Palo Alto back way when. There were many incumbent competitors for Palo Alto, and it is only now that Palo Alto is the market leader in NGFWs.
For Zscaler, they have unique technology that provides distinct product benefits. The numbers however…Zscaler needs to start retaining new customers. Not any more difficult than that. So you can hope they will start doing so, or pretend the numbers are lying.
Either way, if you bought back in the crash of Oct and Dec of 2018 your still up more than 50% on Zscaler despite it all. When you buy matters a lot. It makes it a lot easier to hold as well if you buy on such opportune moments. The odds are that Zscaler’s fundamentals will improve. Whether or not Zscaler can become a category killer is TBD. Makes a big differences the distinction between improving fundamentals or category killer. But either way, even after the awful earnings, and even after the Coronavirus crash, had you bought when I bought your still up more than 50% in a little more than a year. Not bad.
With Zscaler you have 3 quarters probably to wait for the turnaround (Zscaler and Palo Alto were nearly identical in their earnings calls. It was as if it is a completely secular issue for the industry). We hope (because we have seen it before) it happens sooner. Holding a concentrated portfolio I decided to take my profits and move to a simpler story with all 8 cylinders firing like a machine, with a narrative that equates to the numbers, and then some, and with a very pragmatic product value, both for now, and in its road map.
I would not be surprised to see Zscaler come back as Zscaler is completely disruptive. This is not just another security company, it is a company that changes the entire network paradigm. As an investor, however, I am pragmatic.
Tinker