Zscaler stock rating cut at Piper Sandler, target to $260

On Friday, Piper Sandler analysts revised their stance on Zscaler (NASDAQ: ZS), shifting the stock rating from Overweight to Neutral, while raising the price target to $260 from $235. The adjustment comes despite the company’s strong performance in the third quarter and a less challenging outlook for back half billings. The stock’s impressive 60.3% gain over the past year and current trading price of $251.11 support Piper Sandler’s cautious stance. According to InvestingPro analysis, the stock’s RSI indicates overbought territory, and current valuations suggest the stock is slightly overvalued relative to its Fair Value estimate.

The analysts at Piper Sandler expressed caution about the future, noting several factors that investors should consider. The integration of a recent acquisition and the guidance for the upcoming fiscal year, which is based on annual recurring revenue (ARR) that could fall below the 20% growth threshold, were highlighted as potential concerns. While the company maintains strong revenue growth of 27.77% and impressive gross profit margins of 77.86%, the uncertainty surrounding Federal Reserve policy decisions was mentioned as a reason for the downgrade. (InvestingPro subscribers can access 12 additional key tips about Zscaler’s financial health and growth prospects.)

The firm’s analysts believe that while Zscaler has delivered solid fundamental performance and seen a corresponding rise in stock price, the current valuation may not offer the most attractive opportunity for investors to enter the market. With a market capitalization of $38.85 billion and trading near its 52-week high, they recommend that investors should avoid chasing the stock at its current levels and instead wait for more favorable buying points. For deeper insights into Zscaler’s valuation metrics and comprehensive analysis, investors can access the detailed Pro Research Report available on InvestingPro.

Piper Sandler’s new price target of $260 represents an increase from the previous target of $235. This change reflects the company’s recent achievements, including exceeding third-quarter metrics. However, the analysts’ outlook remains cautious as they anticipate potential challenges ahead for Zscaler.

In summary, while acknowledging Zscaler’s recent success, Piper Sandler advises investors to exercise prudence, particularly in light of the stock’s rapid ascent and the various challenges on the horizon. The firm suggests that better opportunities to purchase Zscaler shares may arise in the future.

In other recent news, Zscaler Inc (NASDAQ:ZS). reported impressive financial results for the third quarter of 2025, surpassing analysts’ expectations. The company achieved earnings per share (EPS) of $0.84, exceeding the forecast of $0.76, and reported revenue of $678 million, marking a 23% year-over-year increase. This strong performance reflects a growing demand for Zscaler’s cybersecurity solutions. Additionally, Zscaler announced the acquisition of Red Canary for $675 million, a strategic move expected to enhance its security operations capabilities. Analyst firms have taken note, with some expressing optimism about the company’s growth trajectory.

Furthermore, Zscaler’s annual recurring revenue (ARR) reached $2.9 billion, also reflecting a 23% year-over-year increase. The company continues to expand its customer base, with a notable increase in customers generating significant ARR. Zscaler has provided a positive outlook for the future, with Q4 revenue guidance set between $750 million and $770 million. The strategic initiatives, including the Red Canary acquisition, are expected to drive further growth. Overall, these developments highlight Zscaler’s strong market position and ongoing expansion efforts.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.