Overview
Stephens has cut its price target for Zscaler to $225 from $340 but retained an Overweight rating on the cybersecurity software provider. The brokerage's revised valuation reflects a move to a more conservative roughly 8.5 times enterprise value to forward revenue multiple amid what it characterizes as software multiple compression.
Market context and share performance
Zscaler shares are trading at $159.75, down 41% over the prior six months and trading just above the company's 52-week low of $159.66. Stephens noted that the stock is trading near a three-year trough on enterprise value to revenue metrics, a key factor behind its lowered target.
Expectations for upcoming results
The firm expects Zscaler (NASDAQ: ZS) to post solid second-quarter fiscal 2026 results. Stephens views the upcoming report as a potential positive catalyst that could address the organic growth concerns that surfaced in the prior quarter. Specifically, the research house said results that support a sustained at-scale 20% growth trajectory tied to Zero Trust and SASE could help reset investor sentiment in the near term.
Growth and longer-term optionality
Stephens framed Zscaler’s near-term story as an at-scale 20% growth profile driven by Zero Trust and SASE adoption, with longer-term optionality in Security Operations modernization and AI security. The firm added that maintaining 20%+ organic growth together with clearer disclosure around the contribution from the Red Canary acquisition should be sufficient to improve market sentiment.
Valuation drivers cited by Stephens
The reduced price target was explicitly tied to a more conservative valuation assumption as software multiples decompress. Stephens applied an approximately 8.5 times enterprise value to forward revenue target multiple to arrive at the new $225 objective.
Analyst and market signals
Analysis noted in the market commentary indicates the stock may be undervalued at current levels and that 28 analysts have recently revised earnings estimates upward. The company’s reported metrics - a 76.77% gross profit margin and 23% revenue growth - were highlighted as supportive of a quality growth narrative.
Other broker moves and company developments
In recent analyst activity, Barclays upgraded Zscaler from Equalweight to Overweight but trimmed its price target to $228.00 from $264.00, citing concerns around the company’s long-term growth trajectory and a potential slowdown in its growth rate over coming years. Citizens reiterated a Market Outperform rating and kept a $355.00 price target, pointing to strong customer retention driven by high switching costs and migration complexity.
Zscaler has also announced product and leadership developments. The company introduced an AI Security Suite intended to enhance enterprise controls and visibility over AI technologies, addressing security needs that traditional models do not cover. In an executive leadership update, Zscaler appointed Dr. Swamy Kocherlakota as Executive Vice President of Agentic AI Security Engineering to focus on security challenges associated with autonomous AI agents.
Research resources
For investors seeking deeper analysis, a comprehensive Pro Research Report on Zscaler is available, described as one of more than 1,400 pro reports accessible to subscribers.
Bottom line
Stephens’ action reduces the near-term price objective on Zscaler to reflect lower target multiples after a period of multiple compression while maintaining conviction in the company’s longer-term growth levers. Upcoming fiscal Q2 2026 results, ongoing disclosure regarding recent acquisitions, and execution on AI security initiatives are focal points that the market will watch for signs of sustained momentum.