Zscaler (ZS): Assessing Valuation After Strong Revenue Growth, Earnings Surprises, and Upbeat Tech Sector Sentiment

If you have been keeping an eye on Zscaler (ZS) lately, you are not alone. Recent reports have spotlighted the company’s strong revenue growth and ongoing earnings surprises, which have caught the attention of both individual and institutional investors. Broader forces have helped as well, including a recent upswing in technology stocks as key inflation data came in as expected, increasing hopes for interest rate cuts that could boost the valuations of growth companies like Zscaler.

Against this backdrop, Zscaler has consistently delivered results that outpace both analyst expectations and the broader market. Over the past month, shares returned 8.1%, a reflection of growing investor confidence. The company’s solid track record, marked by quarterly outperformance, upwardly revised guidance, and new institutional positions, has fueled upward momentum. While there have been periods of volatility, the overall trend this year has pointed to sustained growth and optimism about future prospects.

With so much recent attention and a backdrop of improving sentiment, the big question now is whether Zscaler offers a genuine buying opportunity, or if today’s price already reflects all of the expected growth on the horizon.

Most Popular Narrative: 9.2% Undervalued

According to the most widely followed narrative, Zscaler is trading at a 9.2% discount to its fair value. Analyst models point to robust growth prospects, assigning a higher price target based on anticipated earnings gains and future margin expansion.

Strategic platform innovation and programs like Z-Flex are driving broader product adoption within existing accounts and enabling larger, multi-year deals. This is increasing total contract value and supporting higher future operating margins through scale.

Why do analysts expect so much more upside? The real story is hidden in a few bold estimates. Zscaler's valuation is built on aggressive predictions about future profits and market dominance, but the specifics might surprise you. Curious to know the ambitious drivers behind that double-digit discount? Uncover the financial pillars and growth projections that could transform the company's market position.

Result: Fair Value of $324.66 (UNDERVALUED)

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

However, competition from larger cloud providers and rising operating costs could present challenges to Zscaler’s ability to sustain this high level of growth.

Find out about the key risks to this Zscaler narrative.

Another View: Is the Market Too Optimistic?

While a fair value model suggests Zscaler is undervalued, a look at its sales-based valuation compared to industry standards paints a different picture. By this method, the current price appears significantly higher than what fundamentals may support. Is optimism outpacing reality here?

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 want a different perspective or would like to dig into the numbers independently, it only takes a few minutes to build your own outlook. 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.

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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.

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