TLDR
- Zscaler stock jumped as much as 10% Monday after Guggenheim upgraded it to Buy from Neutral
- Guggenheim set a price target of $214, up from the stock’s current trading price of ~$139.73
- The upgrade follows a post-earnings drop after ZS guided FY2027 revenue and ARR growth of 16–17%, below analyst expectations of ~19%
- Guggenheim says ZS pipeline is “rich with large deals” and sees the stock near intrinsic value
- GuruFocus GF Value puts ZS at ~51% undervalued, though it warns of a possible value trap
Zscaler (ZS) opened sharply higher Monday, rallying as much as 10% in early trading after Guggenheim upgraded the stock to Buy from Neutral. The firm also set a $214 price target, a steep premium to ZS’s current price of around $139.73.
The upgrade comes just days after ZS stock dropped following its third-quarter earnings report.
The earnings reaction was driven by guidance. Zscaler projected FY2027 revenue and annual recurring revenue (ARR) growth of 16% to 17%. Wall Street had been expecting closer to 19% on both metrics.
That gap between guidance and expectations sent the stock lower. Monday’s bounce suggests some investors see the selloff as overdone.
Guggenheim analysts John DiFucci and Lawrence Vensko acknowledged the guidance looked conservative but said management framed it as prudent. They wrote that the current price looks like a chance to buy a leading security platform “at about the intrinsic value of the stock if it were run hyper-efficiently and never grew again.”
That’s a pointed way of saying the downside looks limited from here.
What Guggenheim Sees in the Pipeline
The analysts said their fieldwork points to a pipeline that is “rich with large deals.” The key question is whether the company can close them. DiFucci said indications are positive, though he was careful not to overstate it.
One data point worth watching: Zscaler’s revenue from the channel has dropped from 96% several years ago to 85% as of Q3 FY2026. That shift suggests ZS may be taking more large deals direct, which could improve margins over time.
Guggenheim also flagged ZS’s position in the SASE and SSE markets as a multi-year growth driver, particularly as enterprises look to move away from traditional hardware firewalls.
Over the last six quarters, Zscaler has grown organic new ARR at an average rate of about 17%, which Guggenheim called consistent.
How Other Analysts Are Viewing ZS
Not everyone has followed Guggenheim’s lead. Wells Fargo and Evercore ISI Group both lowered their price targets on ZS in recent weeks, reflecting concern over the softer outlook.
GuruFocus puts ZS’s GF Value at $283.90, implying the stock is about 51% undervalued at current prices. However, the platform also labels it a “Possible Value Trap, Think Twice.”
ZS’s GF Score sits at 62 out of 100. Growth ranks 9/10, but valuation and momentum both score just 2/10.
Insider activity over the last three months shows $2.4 million in stock sold with no reported purchases.
Zscaler’s forward P/E stands at 30.28. The stock has a market cap of approximately $22.6 billion.
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