Is Zscaler (ZS) Undervalued Following Coforge’s AI Security Launch?
Coforge’s launch of its SecureEdge2Cloud Zero Trust solution built on Zscaler (ZS) Zero Trust Exchange has put fresh attention on Zscaler stock, as investors consider what this AI-focused partnership may mean for growth.
See our latest analysis for Zscaler.
Despite the Coforge partnership highlighting Zscaler’s role in AI driven security, the stock has been volatile, with the share price falling 5.3% over the past day and 5.5% over the past week. It is still showing a 30 day share price return of 11.7% and a 90 day share price return of 18%, while longer term total shareholder returns over one, three and five years have been weak. This indicates that recent momentum is building from a lower base.
If you are assessing how AI themed security stories translate into broader opportunities, this is a good moment to scan 52 AI infrastructure stocks.
The recent rebound in Zscaler, set against weak one to five year shareholder returns, leaves a key tension: are investors starting to reprice the business, or is sentiment simply snapping back after a sharp reset?
Most Popular Narrative: 27.7% Undervalued
With Zscaler last closing at $139.27 against a widely followed fair value estimate of $192.58, the current pricing sits well below that narrative view. That view leans heavily on long term Zero Trust and AI security demand.
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. Read the complete narrative.
Want to see what kind of revenue curve and margin profile would justify that higher fair value for Zscaler? The narrative leans on compounding growth, improving profitability, and a future earnings multiple more often associated with premium software leaders. The tension lies in how quickly those assumptions kick in and how long they can be sustained.
Result: Fair Value of $192.58 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, there are still clear risks to the Zscaler narrative, including rising pressure from large cloud providers building in more security, as well as execution questions around sales turnover and new customer growth.
Find out about the key risks to this Zscaler narrative.
Another View: Zscaler on Sales Based Valuation
The first narrative framed Zscaler as 27.7% undervalued using a fair value estimate of $192.58. On a simple P/S basis, though, the stock trades at 7.1x, which is expensive versus the US Software industry at 3.5x and above weaker one year returns. That gap leaves you weighing perceived quality against valuation risk.
See what the numbers say about this price and find out in our valuation breakdown. See what the numbers say about this price — find out in our valuation breakdown.
Next Steps
With sentiment split between risks and rewards for Zscaler, this is the time to look through the details yourself and move with intent by weighing the 3 key rewards and 2 important warning signs.
Looking for more investment ideas beyond Zscaler?
If Zscaler has your attention, do not stop there. Widen your watchlist now and give yourself more options before the next set of opportunities moves on.
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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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