Mizuho raises Zscaler stock price target to $275 from $250

On Friday, Mizuho (NYSE:MFG) Securities updated its assessment of Zscaler Inc . (NASDAQ:ZS), raising the company’s price target to $275 from the previous $250, while keeping a Neutral rating on the stock. The adjustment follows Zscaler’s financial results for the third quarter, which showcased a billings growth of 25% year-over-year, surpassing the consensus estimate of 21%. With impressive year-to-date returns of 39% and revenue growth of 25.46%, the company’s performance has been robust. According to InvestingPro data, the stock is currently trading near its 52-week high of $259.4, reflecting strong market confidence. The company’s revenue also exceeded expectations, and its management has indicated that demand continues to be strong.

Zscaler has revealed that its emerging growth areas, which include Zero Trust Everywhere, Data Security Everywhere, and Agentic Operations, are on the verge of achieving $1 billion in annual recurring revenue (ARR). The company maintains impressive gross profit margins of 77.45% and holds more cash than debt on its balance sheet, according to InvestingPro analysis. In addition, the company’s recent announcement of the proposed acquisition of Red Canary for $675 million was discussed. Zscaler’s management anticipates retaining approximately half of Red Canary’s $140 million in ARR, expecting the acquisition to have a broadly neutral impact on the fiscal year 2026 estimated Street operating margins.

The guidance for the fourth quarter provided by Zscaler was described as mixed. Mizuho’s commentary highlighted that Zscaler remains in a strong position within the Secure Access Service Edge (SASE) and Zero Trust markets. However, the firm noted that it may be too early to assert that Zscaler will consistently secure large, transformative deals, especially considering the current macroeconomic conditions and increasing competition within the SASE market.

The updated price target reflects Mizuho’s recognition of Zscaler’s solid performance in the recent quarter. Despite the positive performance, the Neutral rating suggests a cautious stance on the stock’s future movements, taking into account the broader market challenges and competitive dynamics.

In other recent news, Zscaler has reported impressive third-quarter earnings, showcasing a 25% year-over-year growth in billings, surpassing the guided 21%. The company’s free cash flow exceeded expectations by 14%, and its operating margin was 44 basis points higher than anticipated. Analysts from UBS, TD Cowen, BMO Capital Markets, Wolfe Research, and JMP Securities have all raised their price targets for Zscaler, with UBS setting it at $315, TD Cowen at $300, BMO Capital at $295, Wolfe Research at $310, and JMP Securities maintaining it at $310. UBS and TD Cowen analysts noted the company’s strong sales execution and resilience in its business model, while BMO Capital highlighted its robust financial performance and increased FY25 billings guidance.

The strategic acquisition of Red Canary is expected to enhance Zscaler’s capabilities in security operations and artificial intelligence. This move aligns with the company’s ongoing expansion into emerging growth categories such as Zero Trust Everywhere and Data Security. Analysts have emphasized the positive reception of Zscaler’s pricing scheme, ’z flex’, which is favored by clients looking to scale their engagement with the company. Zscaler’s leadership team, recognized for enhancing sales productivity, has set a future goal of reaching $5 billion in Annual Recurring Revenue (ARR). The company’s strategic initiatives and strong financial health have led analysts to maintain positive outlooks, with several reiterating Buy or Outperform ratings.

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