My broker is Schwab and they provide copies of Morningstar’s analytic reports to us as a free service on the stocks we choose. Morningstar reported on Zscaler on May 30 after earnings. They are very, very, focussed on valuation and moat so they rarely recommend one of our stocks.
However, they chose to parry the OTR report by reissuing their May 30 report last evening with the headline: Zscaler Displaying Nonstop Momentum, and they appear to have raised their rating as of last evening (Aug 19), to 3 stars from 2 stars, based on the price coming back yesterday to close at a price close to what they consider fair value ($67). They apparently have to follow their rules of valuation, but I can tell you that I have never seen Morningstar write such an ecstatic write-up of one of our little stocks before.
Here’s an excerpt from their report. It’s a multipage, multisection report and this is just a snippet:
Narrow moat Zscaler delivered another stellar quarter, exceeding our expectations as well as consensus estimates on both the top and bottom lines. The beat-and-raise cadence of past results persisted with management raising full-year guidance higher than even our above consensus estimates. Enterprises continue to adopt external SaaS and public cloud infrastructure for IT agility and efficiency with the?attendant traffic and security implications driving demand for the firm’s platform.
We continue to see evidence supporting our positive moat trend rating,which we maintain, and raise our fair value estimate to $67 per share from $62 to reflect the time value of money and modestly higher near term growth assumptions… We continue to see them as fully valued and would recommend prospective investors await a wider margin of safety before committing capital to this cybersecurity disruptor ….
Zscaler performed admirably on the margin front with gross and operating margins widening by 100 and 1360 basis points to 82.2% and 7.7% repsectively….
And it continues like that.
Saul
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they chose to parry the OTR report by reissuing their May 30 report last evening with the headline: Zscaler Displaying Nonstop Momentum
Saul, I am not sure how familiar or how often you use Morningstar Research. The primary reason for the report is M* moved the stock from “overvalued” to “fairly valued”. The fair value for the stock is $67 and since the price dropped close to that number, the rating changed. The M* report issue has nothing to do with OTR.
Perhaps, you might have noticed no new research notes were added for y’day or for August.
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Perhaps, you might have noticed no new research notes were added for y’day or for August.
Hi Kingran,
Of course I noticed. I wrote reissuing their May 30 report last evening.
Best,
Saul
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So this is simply based on the price dropping closer to their fair value and not a report in response to OTR, as you claimed.
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they chose to parry the OTR report by reissuing their May 30 report last evening
Saul,
Thanks for pointing out to the board that M* reissued their May 30 report last evening. It is good to know that their reissued report suggests ZS is close to “fair value” whatever that means. Obviously they did not write this report to counter the OTR report, as you noted in your original post, and your response, and which you never remotely suggested was the case.
Although they are tied to their notion of fair value, M* has definitely issued favorable reports on many of our stocks, in particular TWLO and NOW, and I guess ZS too. They really beat the drum on NOW, and also GWRE for quite a while. They feel TWLO has the potential to become a “cloud titan”. Again, thanks for pointing out to the board that M* chose to parry the OTR report by reissuing their May 30 report last evening. We appreciate what you do for the board.
Guy
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Do you guys want insights about how someone that has smashed the market averages for 30 years thinks (for free), or do you want to just post snarky messages to waste everyone’s time?
If you didn’t think his post was valuable to you, that’s fine. If you have a better understanding of how Morningstar or another service works, and want to share, go ahead and post.
But your grandstanding reply to Saul above truly does nothing for anybody.
-mekong
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