Zscaler (ZS) is back in focus after announcing two ecosystem partnerships: one with P0 Security on policy driven authorization controls and another with Versa that automates secure, resilient branch to cloud connectivity.

Despite the partnership momentum, Zscaler’s share price has been under pressure, with a 90 day share price return showing a decline of 39.64% and a year to date share price return showing a decline of 37.77%. The 3 year total shareholder return of 21.58% indicates a stronger longer term picture than the 1 year total shareholder return, which shows a decline of 30.82%.

If these Zero Trust partnerships have you thinking about where else security and AI are intersecting, it could be worth scanning 65 profitable AI stocks that aren't just burning cash

After a sharp reset in the share price, Zscaler now trades at a sizeable discount to published analyst targets and some intrinsic value estimates. This raises a key question: is this a genuine entry point, or is the market already factoring in future growth?

Most Popular Narrative: 20.5% Undervalued

According to the most followed narrative, Zscaler’s fair value sits at $172.68 versus the last close of $137.26. This points to a sizeable valuation gap that hinges on how investors view its cloud security positioning and growth runway.

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. Key products and services include Zscaler Zero Trust Exchange, Secure Web Gateways, Zero Trust Network Access, Cloud Application Security Broker, and Secure Access Service Edge. Zscaler also offers professional services to accelerate digital transformation and enhance security.

Want to see why this narrative supports a higher price tag than the market? It leans heavily on robust cloud security adoption, expanding zero trust usage, and future margin potential. Curious how those moving pieces feed into the fair value math, and what kind of growth and profitability curve is embedded in that story?

Result: Fair Value of $172.68 (UNDERVALUED)

However, this story can break if execution slips or competitors gain share, especially with Zscaler still reporting a net loss of US$67.63m.

Next Steps

With sentiment clearly mixed, this is the moment to look through the numbers yourself and decide if the optimism stacks up in your view; review the 2 key rewards

Looking for more investment ideas?

If Zscaler has sharpened your thinking, do not stop here. Broaden your watchlist with other focused ideas that could suit different roles in your portfolio.

• Target potential mispricings by scanning companies that screen as high quality and attractively valued via the 62 high quality undervalued stocks.
• Strengthen your income focus by reviewing businesses with 5%+ yields that feature in the 12 dividend fortresses.
• Prioritise resilience by checking out companies that stand out in the 62 resilient stocks with low risk scores.

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.