Key Takeaways
- KeyBanc Capital Markets increased Zscaler’s price target from $185 to $210 while maintaining an Overweight rating
- Recent channel checks showed stable trends quarter-over-quarter, though qualitative sentiment continues to show mixed signals
- Some weakness was observed in the partnership alignment between Zscaler and CrowdStrike field teams
- The company’s valuation stands at 6.6x revenues compared to peer group average of 10.7x revenues
- Zscaler’s October analyst day event may provide a platform for enhanced investor communication
Shares of Zscaler (ZS) advanced 2.11% during Friday’s trading session following KeyBanc Capital Markets’ decision to lift its price objective to $210 from the previous $185 target, while reaffirming its Overweight recommendation. The security stock was changing hands at $178.65 during market hours.
KeyBanc’s Eric Heath reported that recent channel checks for Zscaler showed stability on a quarter-over-quarter basis. That said, Heath observed that qualitative commentary about the company continues to show mixed sentiment, especially regarding its positioning as a comprehensive platform provider and its competitive positioning.
Heath identified one troubling development: a weakening in the sales coordination between Zscaler and CrowdStrike teams operating in the field. According to his research, channel partners remain uncertain about what’s driving this misalignment.
Nevertheless, KeyBanc maintained its optimistic stance on Zscaler. The investment firm cited an improving cybersecurity spending climate and Zscaler’s commanding position in the SASE market as primary drivers behind its favorable perspective.
The firm also noted that network segmentation has emerged as a priority area for enterprises following the Claude Mythos launch. KeyBanc believes Zscaler’s cloud-native security architecture positions it favorably to address this growing demand.
The valuation gap represented another pillar of KeyBanc’s optimistic outlook. With Zscaler trading at 6.6 times revenue multiples versus 10.7 times for comparable cybersecurity companies achieving over 10% growth, the firm sees potential for valuation rerating.
Core Business Metrics Remain Robust
The company’s fundamental performance indicators reinforce KeyBanc’s constructive perspective. Zscaler maintains an impressive gross profit margin of 77% while delivering revenue expansion of 25%.
According to InvestingPro’s research, the stock appears undervalued at present price levels, earning inclusion on its list of most undervalued securities. Additionally, 41 analysts have adjusted their earnings projections upward for the coming period.
Management has provided preliminary guidance for fiscal year 2027, which KeyBanc interprets as an encouraging signal ahead of the next earnings release.
October Investor Event on the Horizon
KeyBanc highlighted Zscaler’s scheduled analyst day in October as a possible stock catalyst. The firm believes this gathering presents an opportunity for management to refine its investment narrative.
In conjunction with the Zscaler upgrade, Heath also lifted price targets across multiple cybersecurity stocks, including CrowdStrike (CRWD), Netskope (NTSK), Okta (OKTA), and Rubrik (RBRK), signaling broad optimism about enterprise security expenditures.
Several other Wall Street firms have recently revised their Zscaler assessments. Stifel elevated its price objective to $200 from $175 while maintaining a Buy rating, projecting results that meet or exceed expectations for the company’s fourth-quarter fiscal 2026 performance.
TD Cowen boosted its target to $200 from $180 with a Buy rating, similarly forecasting in-line or superior results in the forthcoming earnings announcement.
Cantor Fitzgerald maintained its Overweight rating with a $225 price target, though the firm acknowledged marginally softer channel check data for Q4 fiscal 2026 relative to the previous quarter.
Trading activity in Zscaler options has intensified recently. Approximately 39,437 contracts changed hands, with call options dominating at 34,601 contracts compared to just 4,836 put options.
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