A Look At Zscaler (ZS) Valuation As Earnings Approach And Shares Trail The Broader Market

Zscaler (ZS) is back in focus after its shares lagged the broader market over the past month, drawing attention to the upcoming earnings report and what fresh analyst estimate revisions might signal.

See our latest analysis for Zscaler.

At around US$131 per share, Zscaler has seen strong short term volatility, with a 1 day share price return of 6.79% alongside a 30 day share price return decline of 14.76% and a 1 year total shareholder return decline of 35.42%. This suggests momentum has been fading recently, even though the 3 year total shareholder return of 27.24% remains positive.

If Zscaler’s recent swings have you thinking about where else growth and risk might be priced differently, it could be a good moment to scan 37 AI infrastructure stocks

With Zscaler valued at about US$19.7b on roughly US$3.0b of revenue, investors are weighing solid top line growth against ongoing losses. The key question is whether the recent share pullback represents a potential opportunity or whether future growth is already reflected in the current valuation.

Most Popular Narrative: 24.1% Undervalued

Against the last close of $131.01, the most followed narrative on Zscaler pins fair value at $172.68, which frames the recent share pullback in a very different light.

Industry Tailwinds:

• Convergence of Networking and Security: As the internet becomes the new corporate network, Zscaler’s vision aligns well with this trend.

• Zero Trust Approach: The shift toward zero-trust architecture favors Zscaler’s solutions.

• Digital Transformation: Organizations increasingly rely on cloud-based services, driving demand for Zscaler’s cloud security platform.

• Growing Cybersecurity Concerns: Rising threats boost demand for robust security solutions, especially with using AI.

• Market Leadership: Zscaler’s strong position and high enterprise penetration contribute to its growth.

Read the complete narrative.

Want to see what is baked into that valuation gap? According to WallStreetWontons, the fair value leans heavily on sustained revenue traction and improving margins over time.

Result: Fair Value of $172.68 (UNDERVALUED)

Have a read of the narrative in full and understand what’s behind the forecasts.

However, this hinges on Zscaler maintaining strong execution and preserving its edge against heavyweight cybersecurity competitors that are aggressively targeting the same zero trust budgets.

Find out about the key risks to this Zscaler narrative.

Another View: Multiples Paint a Tougher Picture

While the community narrative and fair value estimate point to Zscaler trading 24.1% below a $172.68 fair value, its current P/S of 7x is higher than both peers at 6.1x and the US Software industry at 3.5x, even if it sits close to a 7.7x fair ratio. Is that premium a safety net or a margin of error for you?

For a clearer sense of how that price gap could cut both ways, especially if sentiment or growth expectations shift, See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

Seeing both optimism and concern in this story so far, it makes sense to check the numbers yourself and promptly form your own view with 2 key rewards and 1 important warning sign

Looking for more investment ideas?

If Zscaler has sharpened your thinking, do not stop here. Broaden your watchlist now and give yourself more options before the next move in markets.

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.

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