Zscaler (ZS) just reported its latest quarterly results, combining strong year-on-year sales growth with continued losses. Recent AI-focused deals and partnerships have helped revive investor interest in the stock.

The share price has rebounded sharply, with a 36.24% 1 month share price return and an 18.56% 3 month share price return to US$184.60. However, the 1 year total shareholder return is still down 28.26%, suggesting that recent momentum follows a tougher stretch.

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With Zscaler still loss making yet trading at US$184.60, roughly 23% below one intrinsic value estimate and about 20% below the average analyst target, is this recent pullback a fresh entry point, or is future growth already baked in?

Most Popular Narrative: 6.9% Overvalued

At a last close of $184.60 versus a narrative fair value of $172.68, Zscaler is framed as slightly ahead of its estimated worth, according to WallStreetWontons.

Zscaler is revolutionizing cloud security with the industry’s first Security as a Service platform. Their solutions are used by more than 5,000 leading organizations, including 50 of the Fortune 500. As the internet becomes the new corporate network and organizations shift to zero trust architectures, Zscaler’s platform is positioned at the center of this change.

Curious what justifies paying above the narrative fair value? The story leans heavily on sustained cloud security demand, zero trust adoption, and future margins that assume meaningful scaling. The tension between current losses and those future profitability expectations sits at the heart of this valuation call.

Result: Fair Value of $172.68 (OVERVALUED)

However, execution missteps or faster moves by competitors like Palo Alto Networks and Cisco could quickly challenge the growth assumptions behind this overvalued narrative.

Another View: DCF Says Undervalued

That user narrative calls Zscaler 6.9% overvalued at $184.60 versus a $172.68 fair value, but our DCF model points the other way, with an estimate of $239.70. If the same business can look expensive on one lens and cheaper on another, which story do you lean toward?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Zscaler for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 46 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Mixed signals on value can be helpful, but they only get you so far. Take a closer look at the numbers and sentiment now, then round out your view with our breakdown of 2 key rewards and 1 important warning sign.

Looking for more investment ideas?

Do not stop your research with one stock. Broaden your watchlist now so you can spot opportunities before they move too far ahead.

• Target stronger pricing power and consistent quality by checking companies flagged in our 46 high quality undervalued stocks.
• Prioritize resilience and sleep easier at night by scanning stocks highlighted in the 65 resilient stocks with low risk scores.
• Hunt for future standouts early by reviewing the screener containing 22 high quality undiscovered gems before they hit everyone else's radar.

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.