This Cloud Stock Has Upside Potential

The stock has already been a major winner

Cloud security services provider Zscaler Inc (NASDAQ:ZS) is already up almost 51% year-to-date, recently gapping higher thanks to an impressive turn in the earnings booth. Looking at the sentiment data around the stock, Wall Street does not seem properly aligned on this outperformer. As such, there's a strong contrarian case to be made that there's more upside ahead for ZS shares.

What may stand out the most about the stock is that most analysts have bearish views right now. By the numbers, seven of the 11 brokerage firms in coverage have "hold" or "sell" ratings, and coming off a well-received earnings release, it wouldn't be surprising to see bull notes come through in the near term. This would likely bring more buyers to the table.

Not to mention, short interest accounts for 12.5% of the equity's float, or 5.4 times the average daily trading volumes. This elevated reading would suggest Zscaler could enjoy short-covering tailwinds going forward.

Making this trade even more attractive is ZS' Schaeffer's Volatility Index (SVI) of 44%, a gauge of near-term volatility expectations that ranks in the bottom percentile of its annual range, telling us it could be a good time to buy premium.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this ZS commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.