Key Stats for Zscaler Stock
- This-Week Performance: -14%
- 52-Week Range: $115 to $337
- Valuation Model Target Price: $183
- Implied Upside: 49%
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What Happened?
Zscaler stock is down about 14% this week, trading near $123 per share, as investors pulled back from high-multiple software names and reset expectations across the cybersecurity sector. The move came despite stable underlying business updates, pointing to a shift in sentiment rather than fundamentals.
The stock fell this week because investors reacted directly to slowing growth, which pressured Zscaler’s premium valuation multiple. The company reported 25% ARR growth and 21% organic growth, and that deceleration from earlier hyper-growth levels led investors to lower expectations for future returns and reprice the stock.
This week, Zscaler highlighted strong large-deal momentum. CFO Kevin Rubin said the company saw a “record number of Q2 $1 million deals” and generated $290 million in Z-Flex TCV bookings, bringing cumulative Z-Flex bookings to about $650 million, showing that customers are committing to larger and longer-term enterprise contracts. Z-Flex is a flexible purchasing model that allows enterprises to adopt multiple security products under one agreement, increasing deal size and long-term revenue visibility.
Institutional activity added to the mixed sentiment. SG Americas Securities LLC increased its stake by 1,520% to about 116,000 shares worth roughly $26 million, while J. Safra Sarasin Holding AG raised its position by 95% to about 64,000 shares valued near $14 million.
At the same time, Assenagon Asset Management reduced its stake by 52%, and Wealth Enhancement Advisory Services LLC cut its position by 21%, reflecting profit-taking. Insider selling also occurred, with executives selling shares around $157 per share, while institutional ownership remains significant at about 46% of the company. Zscaler competes with CrowdStrike and Palo Alto Networks, but focuses on securing network access through a Zero Trust model rather than endpoint or firewall-based security.
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Is Zscaler Undervalued?
Under valuation assumptions, the stock is modeled using:
- Revenue Growth (CAGR): around 21%
- Operating Margins: around 24%
- Exit P/E Multiple: about 29x
Zscaler’s growth is driven by adoption of Zero Trust security, which allows companies to securely connect users and applications without relying on traditional firewalls, making it more effective for cloud environments and remote work. This model is gaining traction as enterprises shift away from legacy network security toward cloud-based platforms.
The company is expanding through larger enterprise deals and platform consolidation, as customers adopt multiple products across secure access, data protection, and cloud workload security, increasing contract value and retention. This is supported by Z-Flex, which enables flexible, multi-year contracts and broader product adoption.
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Margin expansion is expected as operating leverage improves, with earlier investments in infrastructure and sales normalizing and allowing more revenue to convert into profit as the company scales.
Demand remains supported by enterprise spending on cloud security and AI-related protection tools, which continues to drive long-term adoption.
Based on these inputs, the model estimates a target price of around $180, implying roughly 50% total upside over the next few years, indicating Zscaler appears undervalued with future performance driven by enterprise adoption, larger contracts, and improving profitability.
Over the next 12 months, performance will likely be driven by large enterprise deal growth, continued adoption of Zero Trust security, and expansion into AI-related security products.
How Much Upside Does Zscaler Stock Have From Here?
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All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
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