Zscaler (NASDAQ:ZS) Downgraded by Zacks Research to Strong Sell

Zacks Research downgraded shares of Zscaler (NASDAQ:ZS) from a hold rating to a strong sell rating in a research report released on Thursday morning,Zacks reports.

ZS has been the topic of a number of other research reports. Citigroup reaffirmed a “market outperform” rating on shares of Zscaler in a report on Wednesday, May 27th. Truist Financial set a $210.00 target price on Zscaler in a research report on Wednesday, May 27th. The Goldman Sachs Group reissued a “neutral” rating and set a $179.00 target price on shares of Zscaler in a research note on Wednesday, May 27th. B. Riley Financial reduced their price target on shares of Zscaler from $225.00 to $215.00 and set a “buy” rating on the stock in a research note on Wednesday, May 27th. Finally, HC Wainwright raised shares of Zscaler from a “buy” rating to a “buy” rating in a report on Monday, May 18th. Thirty-four analysts have rated the stock with a Buy rating, six have given a Hold rating and two have assigned a Sell rating to the company’s stock. According to data from MarketBeat.com, Zscaler presently has a consensus rating of “Moderate Buy” and a consensus target price of $217.08.

Zscaler Stock Down 4.5%

Shares of NASDAQ ZS opened at $169.80 on Thursday. The stock has a market capitalization of $27.46 billion, a P/E ratio of -435.38, a PEG ratio of 104.65 and a beta of 0.95. The stock’s fifty day moving average is $161.26 and its 200 day moving average is $150.53. Zscaler has a 52 week low of $114.63 and a 52 week high of $336.99. The company has a debt-to-equity ratio of 0.72, a quick ratio of 1.86 and a current ratio of 1.86.

Zscaler (NASDAQ:ZS) last posted its quarterly earnings data on Thursday, September 3rd. The company reported $1.19 earnings per share for the quarter, topping the consensus estimate of $1.09 by $0.10. Zscaler had a negative net margin of 1.88% and a positive return on equity of 1.29%. The business had revenue of $898.19 million during the quarter, compared to analysts’ expectations of $876.96 million. During the same quarter in the prior year, the business posted $0.89 earnings per share. Zscaler’s revenue was up 24.9% compared to the same quarter last year. Zscaler has set its FY 2027 guidance at 4.860-4.900 EPS and its Q1 2027 guidance at 1.150-1.160 EPS. Sell-side analysts forecast that Zscaler will post 0.13 earnings per share for the current fiscal year.

Insider Transactions at Zscaler

In related news, insider Robert Schlossman sold 3,146 shares of Zscaler stock in a transaction that occurred on Tuesday, June 16th. The shares were sold at an average price of $126.43, for a total transaction of $397,748.78. Following the sale, the insider directly owned 69,366 shares in the company, valued at $8,769,943.38. This trade represents a 4.34% decrease in their position. The transaction was disclosed in a filing with the Securities & Exchange Commission, which is available at this hyperlink. The sale was made to cover tax withholding obligations related to the vesting of equity awards. Also, CEO Jagtar Chaudhry sold 2,878 shares of Zscaler stock in a transaction that occurred on Tuesday, June 16th. The stock was sold at an average price of $126.43, for a total transaction of $363,865.54. Following the sale, the chief executive officer owned 343,038 shares in the company, valued at approximately $43,370,294.34. This represents a 0.83% decrease in their ownership of the stock. Additional details regarding this sale are available in the official SEC disclosure. The sale was made to cover tax withholding obligations related to the vesting of equity awards. Over the last ninety days, insiders sold 16,772 shares of company stock valued at $2,139,799. Company insiders own 17.20% of the company’s stock.

Hedge Funds Weigh In On Zscaler

Hedge funds have recently modified their holdings of the business. Kentucky Retirement Systems Insurance Trust Fund raised its position in Zscaler by 1.4% during the 3rd quarter. Kentucky Retirement Systems Insurance Trust Fund now owns 2,569 shares of the company’s stock worth $770,000 after purchasing an additional 36 shares during the last quarter. Parallel Advisors LLC grew its position in shares of Zscaler by 10.9% in the 3rd quarter. Parallel Advisors LLC now owns 397 shares of the company’s stock valued at $119,000 after buying an additional 39 shares during the last quarter. Smartleaf Asset Management LLC increased its stake in shares of Zscaler by 7.5% in the second quarter. Smartleaf Asset Management LLC now owns 648 shares of the company’s stock valued at $204,000 after buying an additional 45 shares during the period. Larson Financial Group LLC increased its stake in shares of Zscaler by 2.6% in the third quarter. Larson Financial Group LLC now owns 2,040 shares of the company’s stock valued at $611,000 after buying an additional 52 shares during the period. Finally, Crossmark Global Holdings Inc. raised its position in shares of Zscaler by 6.1% during the third quarter. Crossmark Global Holdings Inc. now owns 976 shares of the company’s stock worth $292,000 after acquiring an additional 56 shares during the last quarter. Institutional investors and hedge funds own 46.45% of the company’s stock.

Key Headlines Impacting Zscaler

Here are the key news stories impacting Zscaler this week:

• Positive Sentiment: Strong fiscal fourth-quarter results: Zscaler reported adjusted EPS of $1.19 versus the $1.09 consensus and revenue of $898.2 million versus $877.0 million expected. Revenue and annual recurring revenue (ARR) each increased 25% year over year, while non-GAAP operating margin reached a record 24%. Zscaler Announces Strong Fourth Quarter and Fiscal 2026 Financial Results
• Positive Sentiment: AI and platform demand remain catalysts: Management highlighted growing demand for Security for AI, Agentic SecOps, non-seat-based products and large enterprise deals. Analysts including Baird, Stephens, Needham, Canaccord and Cantor raised price targets, generally citing the earnings beat and potential for conservative guidance to be exceeded. Zscaler Analysts Boost Their Forecasts After Better-Than-Expected Q4 Earnings
• Neutral Sentiment: Analyst opinion is divided: Some analysts called the fiscal 2027 outlook overly cautious and maintained bullish ratings, while others noted that the forecast reflects competitive pressure, the Red Canary acquisition and a more measured growth profile.
• Negative Sentiment: Fiscal 2027 growth is expected to decelerate: Zscaler guided for revenue growth of 16.6% to 17.5% and ARR growth of 16.6% to 17.4%, well below the 25% growth delivered in fiscal 2026. The slower outlook overshadowed the quarterly beat and renewed valuation concerns for high-growth cybersecurity stocks. Zscaler Fiscal 2027 Growth Forecast
• Negative Sentiment: Free cash flow weakened sharply: Fourth-quarter free cash flow fell 65% year over year to $60.8 million, versus approximately $66.9 million expected, as capital expenditures and internal-use software spending increased. Zscaler also announced a restructuring affecting about 3% of its workforce, adding execution concerns. Zscaler Shares Fall Despite Earnings Beat

Zscaler Company Profile

Zscaler is a cloud security company that delivers a cloud-native platform to protect users, applications and data as organizations move away from traditional, network-centric security architectures. The company focuses on a zero trust approach that assumes no implicit trust for users or devices, providing secure access to the internet, SaaS applications and private applications regardless of where users are located. Zscaler positions its services as an alternative to legacy appliances and site-centric VPNs, aiming to simplify security while enabling modern, distributed workforces.

Key offerings are built around the Zscaler Zero Trust Exchange, a multi-tenant cloud platform that enforces security and access policies in-line.