Zscaler (ZS): Assessing Current Valuation as Market Momentum Takes a Pause

If you have been tracking Zscaler (ZS), the cybersecurity company’s stock movement lately might have made you pause for a closer look. With no single major event driving the headlines, it is a reminder that sometimes price shifts happen quietly, leaving investors to dig a bit deeper to find the story. Is the latest move a signal, or just noise in a volatile space where anticipation and caution run high? Looking back, Zscaler’s share price has delivered a strong 55% rise year-to-date and is up 66% over the past year, easily outpacing the broader market. There have been ups and downs through recent months, but the company’s longer-term returns remain solid. The latest blip might have some onlookers wondering if the momentum is fading or simply taking a breather before the next move. So after a strong performance this year, is Zscaler now trading at an attractive entry point, or is the market already pricing in all the future growth?

Most Popular Narrative: 13.2% Undervalued

According to the most widely followed narrative, Zscaler shares are trading below their estimated fair value, with upside seen if future growth targets are met through ambitious platform expansion and market leadership.

Accelerating customer adoption of Zero Trust Everywhere and Data Security Everywhere solutions, particularly among Global 2000 and Fortune 500 firms, is fueling large upsell deals and higher ARR per customer, which should drive sustained double-digit revenue growth and improve net retention rates.

How is this forecast possible? It is all about explosive platform momentum, a bold earnings trajectory and strong margin expansion. The analysts behind this view expect an aggressive combination of growth levers to play out. Want to know which game-changing financial assumptions are behind their bullish price target? The numbers might surprise you. Read on to explore the financial modeling that powers this valuation.

Result: Fair Value of $324.66 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, stiff competition from larger cloud providers and ongoing talent shortages could quickly limit Zscaler’s momentum, which may challenge its future growth story.

Find out about the key risks to this Zscaler narrative.

Another View: Market-Based Valuation Raises Questions

While the SWS DCF model points to Zscaler being undervalued, looking at how its price compares to the industry reveals a different story. Is the current share price justifiable based on sales, or is optimism running ahead of fundamentals?

See what the numbers say about this price — find out in our valuation breakdown.

Stay updated when valuation signals shift by adding Zscaler to your watchlist or portfolio. Alternatively, explore our screener to discover other companies that fit your criteria.

Build Your Own Zscaler Narrative

If you are not convinced by these viewpoints or have your own ideas, it is easy to dig into the details and craft a personalized narrative in minutes. Do it your way.

A great starting point for your Zscaler research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

Looking for more investment ideas?

Smart investors stay ahead by seeking out unique stock opportunities beyond the obvious picks. Now’s your chance to sharpen your edge and find your next winning investment before the crowd.

• Uncover up-and-coming tech companies that are bucking market trends by using our penny stocks with strong financials screener. You can tap into penny stocks with strong financials and spot future growth stories early.
• Boost your portfolio with future-defining companies riding the artificial intelligence wave. Try AI penny stocks to see which innovators are shaping tomorrow.
• Zero in on quality stocks priced below their potential by harnessing the power of undervalued stocks based on cash flows. Aim to capture attractive value opportunities others might miss.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com