Why Zscaler Stock Just Moved

Zscaler (ZS) is back in focus as easing Middle East conflict risks, softer inflation worries and a renewed bid for high-multiple software stocks combined to lift sentiment across the sector.

For you as an investor, the latest move in Zscaler is tied less to company-specific headlines and more to shifting macro expectations around interest rates, as well as a rotation back into software following recent strength in chipmakers.

Recent moves in Zscaler sit against a mixed backdrop, with a strong 19.01% 7 day share price return and a 6.33% 90 day share price return. This contrasts with a year to date share price decline of 33.20% and a 1 year total shareholder return decline of 53.19%, suggesting that short term momentum has picked up after a tougher stretch for longer term holders.

If recent gains in Zscaler have you looking across cybersecurity and AI, it can be useful to compare it with other companies showing meaningful traction in the space, including those in the 62 profitable AI stocks that aren't just burning cash

With Zscaler trading at US$147.33 and sitting at a 33.90% discount to an intrinsic value estimate and roughly 30.70% below analyst targets, you have to ask: is there still real upside here, or is the recent rebound already pricing in future growth?

Most Popular Narrative: 35.3% Undervalued

Against Zscaler's last close at $147.33, the most widely followed narrative anchors on a fair value of about $227.67, framing the current move as a potential discount to long term expectations built around zero trust and AI security adoption.

Explosive growth in AI/ML traffic and emerging threats is creating new security challenges that Zscaler is rapidly addressing with differentiated AI security and agentic operations products, positioning the company to capture a rising share of incremental cyber budgets and expand recurring ARR over the long term.

Read the complete narrative. Read the complete narrative.

Want to understand why this narrative supports a materially higher fair value for Zscaler? It is based on brisk revenue compounding, a shift to positive margins, and a rich earnings multiple anchored to long term subscription growth expectations.

Result: Fair Value of $227.67 (UNDERVALUED)

However, this Zscaler narrative could be challenged if public cloud vendors bundle more security into their platforms, or if rising competition forces heavier spending and weaker margins.

Another View on Zscaler’s Valuation

While the popular narrative frames Zscaler as materially undervalued versus a fair value of about $227.67, the current P/S ratio of 7.5x sends a different message. It is richer than the US Software industry at 3.5x, only slightly below the 8.2x fair ratio, and cheaper than peers at 10.2x. Is the discount to fair value enough to offset the premium to the wider sector?

To see how these numbers stack up in detail and what they might imply for upside or downside risk, take a look at the See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

If the mix of optimism and concern around Zscaler has you thinking, take a moment to review the full picture for yourself and pressure test your thesis against the 3 key rewards and 2 important warning signs.

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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.