Is Zscaler (ZS) A Bargain On Growing Zero Trust Adoption?

Zscaler (ZS) is back in focus after appointing seasoned marketer Nikhil Mehrotra as Senior Director of Marketing, along with reports that more than 700 enterprises are using its Zero Trust Everywhere platform.

See our latest analysis for Zscaler.

Recent marketing hires and expanding Zero Trust Everywhere adoption come as Zscaler’s share price sits at US$149.82, with a 30 day share price return of 20.00% but a 1 year total shareholder return that has fallen 48.06%. This suggests improving short term momentum after a tougher period for longer term holders.

If Zscaler’s zero trust focus has your attention, this is a good moment to broaden your watchlist with other security and infrastructure plays using our 54 AI infrastructure stocks

The recent rebound in Zscaler, after a sharp 1 year pullback, leaves an obvious tension: are investors re-rating genuine business progress around Zero Trust Everywhere, or has sentiment simply swung too far the other way as the price moved?

Most Popular Narrative: 22.2% Undervalued

On the most followed narrative, Zscaler’s fair value of $192.58 sits well above the last close at $149.82, which frames the current Zero Trust Everywhere momentum in a very specific way.

The transition away from legacy security appliances (firewalls, SD-WAN) in favor of unified cloud-delivered security architectures is gaining momentum across key verticals like retail and manufacturing, supporting a multi-year replacement cycle that will boost platform adoption, revenue, and margins.

Read the complete narrative.

Want to see what sits underneath that multi year replacement story? The fair value hinges on a specific mix of sustained revenue growth, margin uplift, and a rich future earnings multiple that would usually be reserved for top tier software platforms. Curious which assumptions have to hold for that to add up?

Result: Fair Value of $192.58 (UNDERVALUED)

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

However, if cloud hyperscalers keep folding more security tools into their platforms, or if competition forces heavier sales spending, Zscaler’s growth-focused narrative could lose conviction.

Find out about the key risks to this Zscaler narrative.

Another View on Zscaler’s Valuation

The analyst narrative frames Zscaler as 22.2% undervalued at a fair value of $192.58, largely anchored to future earnings and multiples. Yet on simple sales based pricing, Zscaler trades on a P/S of 7.6x, which is high versus the US Software average of 3.6x and indicates expectations are already demanding.

Peers come in around 9.8x P/S and the estimated fair ratio sits at 8.3x, so Zscaler is cheaper than similar stocks but still priced at a premium to the wider industry. For you, the key question is whether the Zero Trust and AI story justifies paying a higher price for that middle ground.

See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

If this mix of cautious and optimistic sentiment around Zscaler resonates, consider promptly reviewing the underlying data and forming your own view with the 3 key rewards and 2 important warning signs

Looking for more investment ideas beyond Zscaler?

If Zscaler has sharpened your interest in high conviction opportunities, do not stop here. Use targeted stock lists to sharpen your watchlist and avoid missing potential standouts.

• Spot potential upside early by scanning screener containing 20 high quality undiscovered gems that may not yet be crowded with attention.
• Prioritize resilience and sleep easier at night by reviewing 80 resilient stocks with low risk scores that score well on downside protection.
• Sharpen your focus on balance sheet strength by filtering for solid balance sheet and fundamentals stocks screener (48 results) that can better handle business setbacks.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com