Zacks Research Downgrades Zscaler (NASDAQ:ZS) to Strong Sell

Zscaler (NASDAQ:ZS) was downgraded by equities researchers at Zacks Research from a “hold” rating to a “strong sell” rating in a note issued to investors on Thursday, Zacks reports.

ZS has been the subject of a number of other reports. Citigroup reiterated a “market outperform” rating on shares of Zscaler in a research report on Wednesday, May 27th. Wedbush restated an “outperform” rating and issued a $220.00 target price on shares of Zscaler in a research report on Wednesday, June 10th. BTIG Research reaffirmed a “neutral” rating on shares of Zscaler in a research note on Friday. The Goldman Sachs Group reiterated a “neutral” rating and set a $179.00 price target on shares of Zscaler in a report on Wednesday, May 27th. Finally, Jefferies Financial Group reiterated a “buy” rating and issued a $220.00 price target on shares of Zscaler in a research note on Wednesday. Thirty-four research analysts have rated the stock with a Buy rating, six have given a Hold rating and two have assigned a Sell rating to the stock. Based on data from MarketBeat, the company presently has a consensus rating of “Moderate Buy” and an average target price of $217.08.

Zscaler Stock Performance

NASDAQ:ZS opened at $169.80 on Thursday. The stock’s 50-day simple moving average is $161.26 and its 200 day simple moving average is $150.53. The firm has a market capitalization of $27.46 billion, a PE ratio of -435.38, a price-to-earnings-growth ratio of 104.65 and a beta of 0.95. The company has a quick ratio of 1.86, a current ratio of 1.86 and a debt-to-equity ratio of 0.72. Zscaler has a twelve month low of $114.63 and a twelve month high of $336.99.

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

Insider Activity

In related news, insider Robert Schlossman sold 3,146 shares of the stock in a transaction 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 transaction, the insider directly owned 69,366 shares of the company’s stock, valued at $8,769,943.38. This represents a 4.34% decrease in their ownership of the stock. The sale was disclosed in a legal filing with the Securities & Exchange Commission, which can be accessed through the SEC website. The sale was made to cover tax withholding obligations related to the vesting of equity awards. Also, CFO Kevin Rubin sold 3,000 shares of the stock in a transaction on Thursday, June 25th. The stock was sold at an average price of $124.22, for a total value of $372,660.00. Following the completion of the transaction, the chief financial officer owned 41,901 shares in the company, valued at approximately $5,204,942.22. This represents a 6.68% decrease in their ownership of the stock. The disclosure for this sale is available in the SEC filing. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Insiders have sold a total of 16,772 shares of company stock worth $2,139,799 in the last 90 days. 17.20% of the stock is owned by company insiders.

Institutional Investors Weigh In On Zscaler

Hedge funds have recently made changes to their positions in the business. Handelsbanken Fonder AB grew its stake in Zscaler by 89.6% in the 2nd quarter. Handelsbanken Fonder AB now owns 60,933 shares of the company’s stock valued at $8,601,000 after buying an additional 28,792 shares in the last quarter. Assenagon Asset Management S.A. grew its position in Zscaler by 6.6% during the second quarter. Assenagon Asset Management S.A. now owns 193,297 shares of the company’s stock worth $27,284,000 after buying an additional 11,941 shares in the last quarter. Oxbow Advisors LLC bought a new stake in shares of Zscaler during the 4th quarter valued at about $2,939,000. Qsemble Capital Management LP raised its stake in Zscaler by 105.5% in the fourth quarter. Qsemble Capital Management LP now owns 15,773 shares of the company’s stock valued at $3,548,000 after purchasing an additional 8,099 shares in the last quarter. Finally, Bank of America Corp DE raised its position in shares of Zscaler by 44.3% during the 1st quarter. Bank of America Corp DE now owns 779,245 shares of the company’s stock valued at $109,320,000 after buying an additional 239,326 shares in the last quarter. 46.45% of the stock is currently owned by institutional investors.

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

About Zscaler

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.