KeyBanc raises Zscaler stock price target on security spend outlook

KeyBanc has increased its price target on Zscaler shares (NASDAQ: ZS) from $185 to $210, while retaining an Overweight rating. The investment firm stated that their analysis indicates Zscaler's performance is steady quarter over quarter, with mixed qualitative feedback on the company regarding competition, positioning as a platform vendor, and issues with Red Canary.

KeyBanc also noted a potential problem with go-to-market alignment with CrowdStrike sellers in the field, though the cause remains unclear to partners. The firm sees Zscaler benefiting from a positive security spend environment and its leadership in Software as a Service (SASE). It highlights segmentation as a key focus for customers following the Mythos acquisition, with Zscaler potentially offering a unique solution in the cloud security market.

The firm found Zscaler's valuation to be discounted compared to peers with more than 10% cyber growth, putting the stock at 6.6 times revenues compared to 10.7 times revenues for competitors. KeyBanc also mentioned that Fiscal Year 2027 has already been softened, but the company’s strong fundamentals include a gross profit margin of 77% and revenue growth of 25%, making it undervalued according to InvestingPro analysis.

Additionally, 41 analysts have revised their earnings upward for the upcoming period, according to InvestingPro Tips. A potential analyst day in October could serve as a catalyst for improving messaging around Zscaler.