ZS Should I Buy
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Zscaler Inc. (ZS) is not a strong buy at the moment for a beginner, long-term investor with $50,000-$100,000 available. While the company operates in a promising cybersecurity market and has shown revenue growth, its financial performance is underwhelming, with declining net income and EPS. Technical indicators are mixed, and the options data suggests bearish sentiment. Analysts remain cautiously optimistic, but the stock lacks strong near-term catalysts. A hold strategy is recommended until clearer positive signals emerge.
The MACD is positive and expanding, indicating potential upward momentum. However, the RSI is neutral at 38.881, and the moving averages are bearish (SMA_200 > SMA_20 > SMA_5). The stock is trading below its pivot level of 171.488, with key support at 164.983 and resistance at 177.992. Overall, the technical indicators suggest a cautious stance.
Zscaler is a leader in the growing Zero Trust cybersecurity market.
Analysts believe the company is well-positioned for AI-driven security modernization.
Revenue increased by 25.50% YoY in Q1 2026, reflecting strong top-line growth.
Net income and EPS declined YoY, with EPS dropping by 12.50%.
Gross margin decreased slightly to 76.56%.
Bearish sentiment in the software sector due to AI disruption fears and valuation compression.
Options data indicates bearish sentiment with high put volume.
In Q1 2026, Zscaler's revenue grew by 25.50% YoY to $788.11 million, but net income dropped by 3.62% YoY to -$11.62 million. EPS declined by 12.50% to -0.07, and gross margin fell slightly to 76.56%. While revenue growth is strong, profitability metrics are under pressure.
Analysts have lowered price targets across the board, citing valuation compression and competition concerns. However, most maintain positive ratings, with several firms highlighting Zscaler's leadership in Zero Trust and potential as an AI security beneficiary. Price targets range from $220 to $305, with a consensus view of cautious optimism.
