Zscaler (NASDAQ:ZS) Stock Rating Lowered by Zacks Research

Key Points

• Zacks Research downgraded Zscaler to “strong sell” from “hold,” contrasting with a broader analyst consensus of “Moderate Buy” and an average price target of $217.08.
• Zscaler exceeded quarterly expectations, reporting $1.19 in EPS and $898.2 million in revenue, with revenue up 24.9% year over year; however, management expects fiscal 2027 growth to slow to roughly 17%.
• Investors face additional concerns from weakening cash flow and restructuring: quarterly free cash flow fell 65% year over year to $60.8 million, and the company announced plans affecting about 3% of its workforce.

Zscaler (NASDAQ:ZS - Get Free Report) was downgraded by stock analysts at Zacks Research from a "hold" rating to a "strong sell" rating in a note issued to investors on Thursday, Zacks reports.

Several other research firms have also weighed in on ZS. Stephens set a $215.00 target price on shares of Zscaler in a report on Friday. TD Cowen reaffirmed a "buy" rating and set a $200.00 target price on shares of Zscaler in a research note on Friday. Scotiabank restated an "outperform" rating on shares of Zscaler in a research report on Friday. BTIG Research reiterated a "neutral" rating on shares of Zscaler in a report on Friday. Finally, Rosenblatt Securities reiterated a "buy" rating and set a $200.00 price objective on shares of Zscaler in a research note on Friday. Thirty-four equities research analysts have rated the stock with a Buy rating, five have issued a Hold rating and two have given a Sell rating to the stock. According to data from MarketBeat, the stock currently has a consensus rating of "Moderate Buy" and a consensus price target of $217.08.

Zscaler Stock Performance

Shares of ZS stock opened at $169.80 on Thursday. Zscaler has a 52-week low of $114.63 and a 52-week high of $336.99. The company has a quick ratio of 1.86, a current ratio of 1.86 and a debt-to-equity ratio of 0.72. The stock has a market cap of $27.46 billion, a PE ratio of -435.38, a price-to-earnings-growth ratio of 104.65 and a beta of 0.95. The business has a 50-day simple moving average of $161.26 and a 200-day simple moving average of $150.53.

Zscaler (NASDAQ:ZS - Get Free Report) last posted its earnings results on Thursday, September 3rd. The company reported $1.19 EPS for the quarter, topping the consensus estimate of $1.09 by $0.10. Zscaler had a positive return on equity of 1.29% and a negative net margin of 1.88%.The firm had revenue of $898.19 million for the quarter, compared to analyst estimates of $876.96 million. During the same period last year, the company earned $0.89 earnings per share. Zscaler's revenue for the quarter was up 24.9% compared to the same quarter last year. Zscaler has set its FY 2027 guidance at 4.860-4.900 EPS and its Q1 2027 guidance at 1.150-1.160 EPS. On average, equities analysts expect that Zscaler will post 0.13 EPS for the current year.

Insider Buying and Selling at Zscaler

In other Zscaler news, CFO Kevin Rubin sold 3,000 shares of the stock in a transaction dated Thursday, June 25th. The shares were sold at an average price of $124.22, for a total value of $372,660.00. Following the completion of the sale, the chief financial officer owned 41,901 shares in the company, valued at approximately $5,204,942.22. This represents a 6.68% decrease in their position. The transaction was disclosed in a legal filing with the Securities & Exchange Commission, which is accessible through the SEC website. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Also, CEO Jagtar Chaudhry sold 2,878 shares of the firm's stock in a transaction that occurred on Tuesday, June 16th. The stock was sold at an average price of $126.43, for a total transaction of $363,865.54. Following the completion of the transaction, the chief executive officer directly owned 343,038 shares in the company, valued at $43,370,294.34. This trade represents a 0.83% decrease in their ownership of the stock. The SEC filing for this sale provides additional information. The sale was made to cover tax withholding obligations related to the vesting of equity awards. In the last three months, insiders sold 16,772 shares of company stock valued at $2,139,799. Corporate insiders own 17.20% of the company's stock.

Institutional Investors Weigh In On Zscaler

Several hedge funds and other institutional investors have recently made changes to their positions in ZS. Binnacle Investments Inc acquired a new position in Zscaler during the third quarter worth $25,000. AlphaCentric Advisors LLC acquired a new stake in shares of Zscaler in the 4th quarter worth $29,000. University of Texas Texas AM Investment Management Co. purchased a new position in shares of Zscaler during the 4th quarter worth $30,000. Mcguire Capital Advisors Inc. acquired a new position in shares of Zscaler during the 4th quarter valued at about $32,000. Finally, Strive Financial Group LLC acquired a new position in shares of Zscaler during the 4th quarter valued at about $39,000. Institutional investors and hedge funds own 46.45% of the company's stock.

Key Zscaler News

Here are the key news stories impacting Zscaler this week:

• Positive Sentiment: Strong fiscal fourth-quarter results: Zscaler reported adjusted EPS of $1.19 versus the $1.09 consensus and revenue of $898.2 million versus $877.0 million expected. Revenue and annual recurring revenue (ARR) each increased 25% year over year, while non-GAAP operating margin reached a record 24%. Zscaler Announces Strong Fourth Quarter and Fiscal 2026 Financial Results
• Positive Sentiment: AI and platform demand remain catalysts: Management highlighted growing demand for Security for AI, Agentic SecOps, non-seat-based products and large enterprise deals. Analysts including Baird, Stephens, Needham, Canaccord and Cantor raised price targets, generally citing the earnings beat and potential for conservative guidance to be exceeded. Zscaler Analysts Boost Their Forecasts After Better-Than-Expected Q4 Earnings
• Neutral Sentiment: Analyst opinion is divided: Some analysts called the fiscal 2027 outlook overly cautious and maintained bullish ratings, while others noted that the forecast reflects competitive pressure, the Red Canary acquisition and a more measured growth profile.
• Negative Sentiment: Fiscal 2027 growth is expected to decelerate: Zscaler guided for revenue growth of 16.6% to 17.5% and ARR growth of 16.6% to 17.4%, well below the 25% growth delivered in fiscal 2026. The slower outlook overshadowed the quarterly beat and renewed valuation concerns for high-growth cybersecurity stocks. Zscaler Fiscal 2027 Growth Forecast
• Negative Sentiment: Free cash flow weakened sharply: Fourth-quarter free cash flow fell 65% year over year to $60.8 million, versus approximately $66.9 million expected, as capital expenditures and internal-use software spending increased. Zscaler also announced a restructuring affecting about 3% of its workforce, adding execution concerns. Zscaler Shares Fall Despite Earnings Beat

About Zscaler

Zscaler is a cloud security company that delivers a cloud-native platform to protect users, applications and data as organizations move away from traditional, network-centric security architectures. The company focuses on a zero trust approach that assumes no implicit trust for users or devices, providing secure access to the internet, SaaS applications and private applications regardless of where users are located. Zscaler positions its services as an alternative to legacy appliances and site-centric VPNs, aiming to simplify security while enabling modern, distributed workforces.

Key offerings are built around the Zscaler Zero Trust Exchange, a multi-tenant cloud platform that enforces security and access policies in-line.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.

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