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Investing.com -- Morgan Stanley reshuffled its cybersecurity stock calls, upgrading SailPoint and Zscaler to Overweight while downgrading Fortinet to Underweight.
The bank lifted SailPoint on the back of its leadership in the identity governance market, where it commands around a 22% share.
Analysts cited a 28% annual recurring revenue (ARR) compound annual growth rate (CAGR) from fiscal year 2023 (FY23) to FY26, driven by SaaS transition and “multi-billion dollar legacy replacement opportunity.”
The company has shown early success expanding beyond core identity governance, with contributions from Machine Identity, Data Access Security and Non-Employee Risk Management more than doubling year-on-year.
“SailPoint appears well-positioned to sustain 20%+ ARR growth moving forward,” analysts led by Meta A. Marshall wrote. The stock’s price target was raised to $25 from $16.
Zscaler was also upgraded, with Morgan Stanley pointing to its strong positioning in the $34 billion SASE market, expected to grow at a 24% CAGR.
The bank said Zscaler “could cement itself as the next true platform,” highlighting its expansion beyond network security and into AI-driven security through the Red Canary acquisition.
While the stock is already up 50% year-to-date and trades at a premium, the analysts argue “there continues to be a meaningful opportunity, particularly vs. other opportunities within Cybersecurity.” The price target was lifted to $320 from $280.
By contrast, Fortinet was cut to Underweight from Equal-weight, with Morgan Stanley warning that firewall refresh cycles are proving smaller than expected.
The Wall Street firm expects FY26/FY27 estimates to come down, creating a headwind. Even though the stock has dropped 17% year-to-date, analysts said valuations remain stretched relative to slower growth prospects.
They trimmed their price target on the stock to $67 from $78.
“We tend to look at the risk-reward negatively in the near term,” the analysts noted, though they added they could return to a more positive stance once estimates reset.
Alongside the rating changes, Morgan Stanley also assumed coverage of several other cybersecurity names. Palo Alto Networks was named a top pick with an Overweight, supported by its “strategic focus on platformization” and strong positioning across network, cloud, endpoint and identity security.
Okta was initiated at Overweight as the “thousand pound gorilla” in identity access management, with meaningful upsell potential from identity governance and privileged access management.
Varonis also received an Overweight, with the bank highlighting its SaaS transition nearing completion and long-term opportunity in data security posture management as enterprises prepare for the AI era.
The moves reflect Morgan Stanley’s broader framework, which ranks cybersecurity firms on quantitative metrics such as growth and margins as well as qualitative factors like platform positioning and AI integration.