Zscaler (ZS) is back in focus after a sharp market reaction to its recent earnings, cautious revenue outlook and sales leadership changes, followed by fresh analyst upgrades and renewed attention on its AI driven zero trust security platform.

Those earnings and guidance updates have come against a choppy share price backdrop, with the stock down 39.08% year to date on a share price basis and the 1 year total shareholder return declining 54.73%. This suggests momentum has been fading despite recent short term rallies.

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With the stock down sharply over 1 and 3 years, yet trading at roughly a 35% discount to an intrinsic value estimate and over 40% below the average analyst target, you have to ask: is this a reset that opens the door to a buying opportunity, or is the market already correctly pricing in Zscaler’s future growth?

Most Popular Narrative: 41% Undervalued

The most followed narrative pegs Zscaler’s fair value at about $227.67 per share, well above the last close of $134.37. This frames the recent share price pullback against a higher long term value estimate built on 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.

Curious what sits behind that confidence in zero trust, AI security and recurring ARR growth? The narrative leans on faster revenue expansion, improving margins, and a rich future earnings multiple that few companies command. The key question is which set of projections actually justify that fair value.

Result: Fair Value of $227.67 (UNDERVALUED)

However, this upside narrative still runs into real friction if large cloud providers keep folding security into their stacks, or if sector wide pricing pressure bites into margins and ARR growth expectations.

Next Steps

With both real risks and real upside on the table, do you want to rely on others or stress test the assumptions yourself using 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.