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On Friday, Wolfe Research analyst Alex Zukin adjusted the price target for Zscaler stock, traded on (NASDAQ:ZS), to $310.00, a significant increase from the previous $250.00, while maintaining an Outperform rating on the shares. According to InvestingPro data, Zscaler is currently trading above its Fair Value, with a market capitalization of $38.85 billion. The revision followed Zscaler’s third-quarter fiscal year 2025 earnings release, which occurred after the market closed. Post-earnings, Zscaler’s stock experienced a rise of approximately 5% in after-hours trading.
Zukin’s commentary highlighted Zscaler’s strong performance relative to industry benchmarks, noting that the company’s shares had surged 40% year-to-date, outperforming the IGV, which rose by 2%, and Wolfe Research’s All Security Index, which increased by 9%. InvestingPro data confirms this impressive performance, showing a 60.3% return over the past year and the stock trading near its 52-week high of $259.40. Over the past three months, Zscaler’s stock had also seen a notable 28% increase compared to the IGV’s 5% and the All Security Index’s 1% over the same period.
The analyst’s optimism extends to future revenue projections as well, with an increase in the fiscal year 2025 revenue estimate by 0.5%. This outlook is supported by Zscaler’s current revenue growth of 27.77% and impressive gross profit margins of 77.86%, according to InvestingPro analysis. Additionally, estimates for fiscal years 2026 and 2027 were also raised by 0.5%, with expected year-over-year growth rates of 22.7%, 20.2%, and 19.0%, respectively. For detailed growth projections and 13 additional ProTips, consider exploring the comprehensive Pro Research Report available on InvestingPro. Zscaler’s forward-looking valuation multiples were compared to a group of top-performing SaaS companies, with Zscaler trading at premiums of 48% and 41% on CY26E base case revenue and free cash flow (FCF) estimates.
Historically, Zscaler has traded at average FY+2 Sales multiples of 9.5x, 9.9x, and 10.1x over one, three, and five-year periods, respectively. In terms of FCF multiples, the historical averages were 37x, 41x, and 43x for the same time frames. Zukin’s new price target implies CY26E base case Revenue and FCF multiples of 13.8x and 45.5x, respectively, on the base case and 12.9x and 39.7x on upside estimates.
In his closing remarks, Zukin expressed a long-term positive outlook for Zscaler, citing the company’s potential to disrupt the legacy network security market and benefit from the adoption of artificial intelligence. The Outperform rating reflects continued confidence in Zscaler’s ability to deliver leading efficiency through a combination of revenue growth and expanding FCF margins.
In other recent news, Zscaler reported a 23% revenue increase and an 18% free cash flow margin for its third fiscal quarter of 2025, reaching over $2 billion in Annual Recurring Revenue. The company also announced a seven-figure deal with a Fortune 100 beverage company, bolstering its market position. Analysts have responded positively, with Stifel raising its price target to $295 and maintaining a Buy rating, citing Zscaler’s robust performance and revised financial guidance. BTIG also adjusted its price target to $298, recognizing the company’s strong billings growth and competitive position. Evercore ISI increased its target to $290, noting Zscaler’s successful go-to-market strategy and strong demand environment.
Meanwhile, Morgan Stanley (NYSE:MS) raised its price target to $280, acknowledging Zscaler’s better-than-expected performance and second-half billing growth reacceleration. The company recently appointed a new Chief Financial Officer and announced the acquisition of Red Canary, which is expected to enhance its managed detection and response capabilities. Zscaler’s expanding product portfolio, including offerings like Data Protection and Cloud Workload, continues to drive growth, with these products nearing $900 million in Annual Recurring Revenue. The company’s strategic moves and ongoing developments have led to a positive outlook from various analyst firms, reflecting confidence in its growth trajectory.
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