Zscaler is a world wide monopoly that is utterly disruptive with a multiple year advantage over anyone else who may try to replicate what they do along with a networking effect that will only grow.
In addition they are 100% subscription revenue SaaS.
The current valuation is quite justifiable based upon Blue Coat’s acquisition value. As for the valuation going forward, at 50%+ growth per year it comes down quickly, but it still will be at the peak of Shopify multiples going into next year, and then come down to something most of us can stomache two years out.
The valuation does concern me, but I bought into Zs when the price crashed and enterprise value was in the $3 billion range and I bought a ton of it at that time. It has rapidly risen since then.
I am recommending everyone buy it on the fundamentals that are utterly superb, BUT I AM RECOMMENDING THAT NO ONE BUY IT ON THE VALUATION.
This is a clear and textbook and rare Rule Breaker stock that hits every criteria, including overvalued.
ISRG was always overvalued as an example, with a worldwide monopoly and huge moat. Whether or not Zs deserves said is based upon the fundamentals described above. I can only describe why it is valued as it is, not that the valuation is good or bad or just right. I frankly do not know in the end.
Btw I used the all caps above so no one gets the impression that I am recommending they do anything. I was just making the point of fundamentals/valuation and how they work in the opposite direction here. I own a ton of it. I may sell some or all or I may not.
The fundamentals are about as good as you will find anywhere. The valuation…
Tinker