One of the standouts of today's afternoon trading session has been Zscaler, which logged a -1.2% drop and underperformed the S&P 500 by -1.0%. The Data Processing Services stock is now trading at $154.19 per share and is -16.19% below its average target price of $183.97. Analysts have set target prices ranging from $145.0 to 254.0 dollars per share, and have given the stock an average rating of buy.
For the greater market's outlook on the stock, we can use Zscaler's short interest as a proxy. The short interest represents the proportion of the float's shares that are tied to short positions, meaning that the investor believes the stock will decline in the future. Here, the stock's short interest is 6.5% which means the outlook is split.
When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.
A possible indicator of market sentiment on a stock (besides its share price, of course) is the portion of institutional investors that make up its shareholders. Institutions such as banks, hedge funds, and wealth managers deploy significant resources towards identifying good investments. If they are invested heavily in a given company's stock, it could mean it's a good investment. Or it could mean the company is being targeted by a takeover attempt.
For what it's worth, institutions own 49.4% of Zscaler's shares, which is an average amount. It means that many institutions are invested, but not to the extent that they would be in a stock such as Apple or Amazon, whose institutional ownership rates hover around 60%. Bear in mind that institutional ownership is just one piece of the puzzle in determining market sentiment, and you should not consider this factor alone in making an investment decision.
To sum up, Zscaler is probably the subject of positive market sentiment because of an analyst consensus of some upside potential, a buy rating, an average amount of shares sold short, and only a small number of institutional investors. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.
Here's a snapshot of some important facts to keep in mind about ZS:
The stock has trailing 12 month earnings per share (EPS) of $-1.37
Zscaler has a trailing 12 month Price to Earnings (P/E) ratio of -112.5 compared to the S&P 500 average of 15.97
The company has a Price to Book (P/B) ratio of 31.29 in contrast to the S&P 500's average ratio of 2.95
Zscaler is a Technology company, and the sector average P/E and P/B ratios are 27.16 and 6.23 respectively