Key Takeaways
- Zscaler stock rose 14% in the past month, despite a 10% one-day drop when its chief revenue officer stepped down.
- An Investor Day that reaffirmed guidance and set a base case of more than $8 billion of ARR by fiscal 2031 brought a wave of price-target raises.
- Critical web-server flaws lifted Zscaler, CrowdStrike and Palo Alto Networks on Wednesday, another sign that companies have to keep spending on security.
- The stock now sits at Wall Street’s average price target, but it still trades far below its own historical multiple. That makes it a long-term buy if late-November results hold up.
Zscaler (ZS) lost its sales chief last month, and the stock fell 10% in a day. But it’s already gained all that back and more – it’s up 14% in the past month, while the Nasdaq 100 slipped 2%.
The “down” reaction made sense at the time. Rich built the account-focused sales overhaul that pushed net new ARR growth to 17% in the fiscal fourth quarter, up from 7% in fiscal 2025. And CFO Kevin Rubin had already blamed part of the cautious fiscal 2027 guide on sales leadership changes.
But then Investor Day won it all back
At its Oct. 6 Investor Day, Zscaler reaffirmed its guidance, including revenue growth of 16.6% to 17.5% for fiscal 2027. It also set a base case of more than $8 billion of ARR by fiscal 2031, more than double where it ended fiscal 2026.
“The agentic AI era is quickly becoming the most significant opportunity in our company’s history,” said CEO Jay Chaudhry.
Eleven firms raised their price targets the next morning, from Evercore ISI’s $195 to Baird’s $285. The stock rose 19% over the five sessions through Oct. 9. The run ended with a 7.8% jump that day, when CrowdStrike (CRWD) and Palo Alto Networks (PANW) gained about 4% each.
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Hackers keep making the bull case
Zscaler fell 5.9% on Oct. 16 as software stocks sold off on worries about AI funding.
On Wednesday, it jumped 7.8% with CrowdStrike, Palo Alto and the rest of the group. The team behind the PHP programming language had just fixed two critical flaws that let attackers run their own code on web servers. Attacks started before the patch was out.
That’s the gap Zscaler’s new tool with IBM and Red Hat targets: the stretch between a flaw going public and the fix going in. As long as attackers keep getting better, “companies will keep having to pay for defensive cyber capabilities,” Bloomberg’s Joe Weisenthal wrote on X.
Late November is the next test
Fiscal first-quarter results are due in late November, with guidance for revenue of $935 million to $939 million, up about 19%. It’s the first report since Tackett took over, and the first to show Zscaler’s newer growth engines as a group. Those grew ARR 60% combined in fiscal 2026.
Analysts expect revenue to grow about 17% a year through fiscal 2029, in line with the guide…
That’s slower than CrowdStrike, which grew revenue 26% in its latest quarter. Zscaler only reaffirmed its guidance, so those estimates shouldn’t move much before the report.
I’d buy more, but the easy gains are gone
Wednesday’s close left the stock within 1% of the Street’s average price target…
That average has climbed to $233 from a low of $193 in mid-July, and the stock has caught up to it.
By its own history, though, Zscaler still looks cheap…
It traded at 44x forward earnings on Tuesday, and Wednesday’s jump puts it closer to 47x. That’s well below its four-year average near 64x and the 100x-plus it fetched in late 2024.
My take: I’d buy more. If the newer products keep growing anywhere near 60%, today’s multiple could look cheap a year from now.
Of course, a stock at its average target has little room for error. Another guidance reset like the 31.5% one-day drop after the May report would hurt. November’s numbers need to show ARR and the new products holding up.
So what is Zscaler stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
