Zscaler Will Hit $360 Soon: Here’s the How and Why

Key Points

• Zscaler's stock price is on track to reach all-time highs after reporting a solid FQ3 and guiding Q4 in alignment with forecasts.
• Cash flow is robust, driving significant shareholder value gains in FY2025. 
• The analyst's activity signals a shift in sentiment and a new tailwind for this market. 

Zscaler’s NASDAQ: ZS share price is expected to reach $360 due to technical price action, favorable analyst sentiment, and the results driving it. The latest price action has this market breaking out to new highs, confirming not only the near-term uptrend but also breaking the market out of a long-term trading range.

The trading range was in place due to valuation concerns and risks of slowing growth. The breakout occurred because the business fundamentals are catching up to the valuation, leading to an improved outlook. That is for sustainable 20% growth, free cash flow, and improving shareholder value.

Regarding the soon in this forecast, the technical action suggests this move could be completed by late this year or by early 2026. The target is due to the magnitude of the trading range, which, in this case, is a minimum target. The price action has broken to new highs robustly and may consolidate well above the critical support target, indicating that a bull-case scenario is in place.

The market could rise to a new all-time high in that scenario due to the magnitude of the recovery rally currently underway. Using it to project targets puts this market in the range of $375 to $403, sufficient for a new high and a likely precursor to even higher highs.

Here’s why. 

Zscaler Wows the Analysts With Fiscal Q2 Results

Analyst activity in Zscaler was tepid for more than a year, with price target reductions and generally poor responses to results hampering the price action. Then Bam! Zscaler reports its FQ3 2025 results, and the analyst’s attitude shifts. MarketBeat reported 24 revisions from the 36 analysts tracked by its platform, including a few reiterated price targets but more increases than decreases.

There were no decreases tracked. The result is a 17% increase in the consensus price target within days of the release, a 25% increase relative to last year, and most revisions leading to the high-end range. The consensus assumes that fair value is near the June opening price levels, but the high-end range adds 15% to it.

At $320, it is still well below the $375 to $400 high-end technical target, but a step in the right direction that could easily turn into a trend, assuming upcoming reports are equally good. 

The takeaway from the analysts' reports is that the results are solid despite macroeconomic uncertainties that negatively impacted guidance for competitors. The strength in Q3 is expected to carry over into Q4, leaving the company with momentum heading into the next fiscal year. New products help the platform carry momentum, and the new Z-Flex is expected to do the same.

Z-Flex is a new purchasing model that allows businesses to streamline adjustments to their security stack, reducing costs while improving flexibility and scalability. 

Zscaler Had a Solid Q3 Despite Slowing Growth

The only bad news coming out of Zscaler’s Q3 report is that growth slowed to the low 20% range. However, the revenue exceeded the analysts' forecasts, growth topped 20% for another quarter, and was further bolstered by accelerated gains in billings and deferred revenue.

Other key highlights for investors to focus on include the 21% increase in net income, an 18% free cash flow margin, and a 25% cash build-up on the balance sheet. Regarding the balance sheet, Zscaler has more than $3 billion in cash and equivalents, and equity is rising, up 41% year-to-date in F2025.

Regarding the guidance, the company forecasts billings in alignment with the analysts’ consensus forecast, leaving the Q3 strength to carry through to the full-year result, and it may be cautious. 

The final piece of the puzzle is the sell-side interest, including short-sellers and institutional investors. The institutions, as a group, own a solid but still small 41% of the stock as of early June, but have been buying it on balance throughout the year. That provides a solid support base and tailwind for price action now amplified by short-covering.

The short interest ahead of the release wasn’t astronomically high at 9%, but it had risen in previous reports and was at a long-term high, setting the market up for a short-covering rally if not a short-squeeze.