Zscaler (NASDAQ:ZS) Shares Gap Down Following Analyst Downgrade

Key Points

• Zscaler shares gapped down after Cantor Fitzgerald cut its price target from $300 to $225, even though the firm kept an overweight rating. The stock opened sharply lower at $137.16 versus its prior close of $184.60.
• Analysts remain broadly positive despite some target reductions, with the stock carrying an average “Moderate Buy” rating and an average price target of $226.58. Several firms, including UBS and Sanford C. Bernstein, still have bullish views on the name.
• Recent earnings were strong, as Zscaler beat expectations with fiscal Q3 EPS of $1.08 on revenue of $850.5 million, both up 25% year over year. However, the company’s guidance disappointed some traders, with concern around tougher cybersecurity competition and cautious enterprise spending.

Zscaler, Inc. (NASDAQ:ZS - Get Free Report) gapped down prior to trading on Wednesday after Cantor Fitzgerald lowered their price target on the stock from $300.00 to $225.00. The stock had previously closed at $184.60, but opened at $137.16. Cantor Fitzgerald currently has an overweight rating on the stock. Zscaler shares last traded at $128.9870, with a volume of 7,307,978 shares trading hands.

Several other research firms have also commented on ZS. UBS Group restated a "buy" rating on shares of Zscaler in a report on Wednesday, May 20th. BTIG Research reissued a "neutral" rating on shares of Zscaler in a research report on Thursday, April 9th. Morgan Stanley set a $145.00 price objective on shares of Zscaler in a research report on Wednesday. Piper Sandler reissued a "neutral" rating on shares of Zscaler in a research note on Wednesday. Finally, Sanford C. Bernstein decreased their price target on shares of Zscaler from $228.00 to $224.00 and set an "outperform" rating for the company in a research report on Wednesday. Two analysts have rated the stock with a Strong Buy rating, thirty have assigned a Buy rating, eight have given a Hold rating and two have given a Sell rating to the company. According to data from MarketBeat.com, the company has an average rating of "Moderate Buy" and an average target price of $226.58.

Insider Buying and Selling

In related news, CFO Kevin Rubin sold 1,682 shares of the business's stock in a transaction dated Tuesday, March 17th. The stock was sold at an average price of $156.59, for a total value of $263,384.38. Following the transaction, the chief financial officer owned 46,479 shares in the company, valued at approximately $7,278,146.61. The trade was a 3.49% decrease in their ownership of the stock. The transaction was disclosed in a legal filing with the SEC, which can be accessed through this link. Also, insider Robert Schlossman sold 2,263 shares of the stock in a transaction dated Tuesday, March 17th. The shares were sold at an average price of $156.59, for a total value of $354,363.17. Following the completion of the transaction, the insider directly owned 72,390 shares of the company's stock, valued at $11,335,550.10. This represents a 3.03% decrease in their position. The disclosure for this sale is available in the SEC filing. Insiders sold a total of 12,130 shares of company stock worth $1,892,487 over the last quarter. Company insiders own 17.20% of the company's stock.

Zscaler News Summary

Here are the key news stories impacting Zscaler this week:

• Positive Sentiment: Zscaler reported fiscal Q3 revenue of $850.5 million and EPS of $1.08, both above estimates, while revenue rose 25% year over year and ARR also grew 25%, reinforcing the company’s strong core demand. Article: Zscaler Announces Strong Third-Quarter Fiscal 2026 Results
• Positive Sentiment: Management raised FY26 guidance and pointed to strength in AI security and record margins, which supports the long-term growth narrative for the cybersecurity platform. Article: ZS Q3 Earnings Call Flags Prudent Growth Outlook
• Positive Sentiment: Several analysts still view the stock favorably despite trimming targets, with Rosenblatt, Bernstein, Baird, and Needham maintaining bullish or buy-equivalent ratings, suggesting Wall Street still sees upside from current levels. Article: Analyst target updates
• Neutral Sentiment: New commentary on Zscaler’s AI security strategy and product expansion adds to the growth story, but also notes the stock may still need stronger execution to justify its valuation. Article: As Zscaler Doubles Down on AI Security, ZS Stock Still Needs More to Justify Its Steep Valuation
• Negative Sentiment: Despite the beat, Zscaler’s guidance disappointed traders: the company forecast fourth-quarter revenue slightly below estimates, and Reuters said the outlook reflected intensifying competition in cybersecurity and more cautious enterprise spending. Article: Zscaler sees downbeat quarterly revenue as competition heats up in cybersecurity market
• Negative Sentiment: Some recent analyst notes turned more cautious, including a Seeking Alpha downgrade citing slowing organic growth, weaker net-new ARR momentum, and competitive pressure from integrated security platforms. Article: Zscaler Q1: I Was Right (Rating Downgrade)

Institutional Trading of Zscaler

A number of hedge funds have recently made changes to their positions in ZS. Binnacle Investments Inc bought a new stake in shares of Zscaler in the third quarter worth $25,000. Root Financial Partners LLC bought a new position in Zscaler during the 3rd quarter valued at $26,000. Picton Mahoney Asset Management bought a new position in Zscaler during the 3rd quarter valued at $30,000. AlphaCentric Advisors LLC acquired a new position in Zscaler during the 4th quarter worth $29,000. Finally, University of Texas Texas AM Investment Management Co. bought a new stake in shares of Zscaler in the 4th quarter worth about $30,000. Institutional investors and hedge funds own 46.45% of the company's stock.

Zscaler Price Performance

The company has a market cap of $20.72 billion, a P/E ratio of -308.17 and a beta of 0.96. The company's 50-day moving average price is $145.75 and its two-hundred day moving average price is $192.65. The company has a current ratio of 1.90, a quick ratio of 1.90 and a debt-to-equity ratio of 0.78.

Zscaler (NASDAQ:ZS - Get Free Report) last issued its quarterly earnings results on Tuesday, May 26th. The company reported $1.08 EPS for the quarter, topping the consensus estimate of $1.01 by $0.07. The business had revenue of $850.48 million for the quarter, compared to analysts' expectations of $835.60 million. Zscaler had a negative net margin of 2.25% and a positive return on equity of 0.06%. The company's quarterly revenue was up 25.4% compared to the same quarter last year. During the same quarter last year, the company posted $0.84 earnings per share. Zscaler has set its Q4 2026 guidance at 1.080-1.090 EPS and its FY 2026 guidance at 4.100-4.110 EPS. As a group, sell-side analysts expect that Zscaler, Inc. will post -0.03 earnings per share for the current year.

Zscaler Company Profile

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.