Zscaler (ZS) And Schwarz Digits Put Fair Value Back In Focus

Zscaler (ZS) stock has drawn fresh attention after the company announced a new Zero Trust Secure Access Service Edge offering with Schwarz Digits. The service is built on the STACKIT sovereign cloud and hosted in German data centers.

See our latest analysis for Zscaler.

The Schwarz Digits alliance comes after a strong run in the past month, with a 30 day share price return of 14.65% and a 90 day share price return of 12.54%. However, the year to date share price return of Zscaler is down 31.26% and the 1 year total shareholder return is down 47.73%, which signals recent momentum following a weaker longer term experience for holders.

If this Zero Trust theme has your attention, it can be useful to look beyond a single stock and scan a wider set of security focused cloud players through the 56 AI infrastructure stocks

After that sharp bounce, and with Zscaler trading at roughly a 27% discount to analyst targets and about a 32% discount to one intrinsic value estimate, is the market showing discipline or being overly cautious about this stock?

Most Popular Narrative: 21.3% Undervalued

The most followed narrative currently sees Zscaler’s fair value at about $192.58 compared with the recent $151.63 share price. This frames a sizeable valuation gap for investors to weigh against the Zero Trust and AI security story.

Explosive growth in AI/ML traffic and emerging threats is creating new security challenges that Zscaler is rapidly addressing with differentiated AI security and agentic operations products, positioning the company to capture a rising share of incremental cyber budgets and expand recurring ARR over the long term.

Read the complete narrative.

Want to see what sits behind that confidence in Zscaler? The narrative focuses on brisk revenue expansion, rising profitability, and a rich future earnings multiple that is usually reserved for market leaders. Curious which specific growth and margin assumptions would need to hold for that fair value to be supported? The full breakdown spells out every step in the model.

Result: Fair Value of $192.58 (UNDERVALUED)

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

However, the Zscaler narrative could be tested if public cloud providers bundle more security into their platforms, or if rising competition and sales execution issues pressure margins and growth expectations.

Find out about the key risks to this Zscaler narrative.

Next Steps

If the mix of risks and rewards around Zscaler leaves you undecided, take time to review the facts for yourself and shape 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, do not stop here. Broaden your watchlist with other clear ideas that could fit different roles in your portfolio.

• Target potential bargains that combine quality with appealing valuations by scanning the 49 high quality undervalued stocks.
• Strengthen your income stream by checking out stocks identified as 8 dividend fortresses.
• Prioritise resilience by reviewing companies highlighted in the 83 resilient stocks with low risk scores.

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.

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