Zscaler Faces Challenges Amid Market Weakness
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jun 23 2024
0mins
Should l Buy ZS?
Source: Coinmarketcap
Zscaler Inc. has seen its stock price drop by 5.65%, hitting a 52-week low, as the broader market struggles with declines in the Nasdaq-100 and S&P 500 indices.
Despite being rated as a top buy by Bernstein, with an upgrade to Outperform and a price target of $228, Zscaler is facing slower customer growth, projected to be 25% to 35% slower than pre-2024 levels. Additionally, RBC Capital has downgraded its price target from $290 to $250, reflecting negative investor sentiment towards the software sector and a preference for companies with clearer AI monetization paths. The recent acquisition of SquareX to enhance its zero-trust capabilities indicates Zscaler's strategic efforts to adapt to the evolving cybersecurity landscape.
The implications of these developments suggest that while Zscaler is positioned well within the cybersecurity sector, the current market conditions and slower growth expectations may challenge its stock performance in the near term.
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Analyst Views on ZS
Wall Street analysts forecast ZS stock price to rise
30 Analyst Rating
24 Buy
6 Hold
0 Sell
Strong Buy
Current: 151.610
Low
260.00
Averages
325.62
High
390.00
Current: 151.610
Low
260.00
Averages
325.62
High
390.00
About ZS
Zscaler, Inc. is a cloud security company. The Company has developed a platform incorporating core security functionalities needed to enable fast and secure access to cloud resources based on identity, context and an organization’s policies. Its Zscaler Zero Trust Exchange platform protects thousands of customers from cyberattacks and data loss by securely connecting users, devices, and applications in any location. Its solution is a purpose-built, multi-tenant, distributed cloud platform that incorporates the security functionality needed to enable users, applications, and devices to safely and efficiently utilize authorized applications and services based on an organization’s business policies. It delivers its solutions using a software-as-a-service (SaaS) business model and sells subscriptions to customers to access its cloud platform, together with related support services. It offers a security platform that combines its platform with automated security operations.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Impact of Stryker Incident: Michigan-based medtech company Stryker recently faced a cyberattack linked to Iran, disrupting its daily operations and causing a 3.6% drop in stock price on Wednesday, illustrating the direct impact of cybersecurity incidents on corporate operations and market confidence.
- AI Development Boosts Security Sector: The widespread adoption of artificial intelligence presents new growth opportunities for the cybersecurity industry, as AI tools enhance workflow efficiency but also introduce potential vulnerabilities, with hackers leveraging AI capabilities to become more dangerous, thereby increasing demand for cybersecurity solutions.
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See More
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- AI Implementation: Armadin focuses on creating autonomous AI agents that can rapidly scan for cyber threats, with Mandia stating that this technology allows tasks that previously took days to be completed in mere minutes, significantly enhancing the efficiency and responsiveness of cybersecurity defenses.
- Team Expansion: Since its founding in September, Armadin has hired over 60 employees and begun collaborations with Fortune 100 companies, indicating a rapid scaling of operations and increased market competitiveness within a short timeframe.
- Market Trend: As the complexity and speed of cyberattacks continue to rise, more tech companies are adopting AI-driven tools, and Mandia's venture aligns with this trend, aiming to enhance cybersecurity capabilities through innovative technology.
See More
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- Acquisition Announcement: OpenAI has announced the acquisition of cybersecurity startup Promptfoo, which will enhance the security and governance capabilities of its Frontier platform, addressing the complexities of modern AI systems despite not disclosing the deal terms.
- Team Integration: The team from Promptfoo will join OpenAI, with CEO Ian Webster stating that this integration will accelerate the enhancement of security and governance capabilities to tackle the challenges posed by AI agents connecting to real data and systems.
- Open Source Continuation: OpenAI will continue to develop Promptfoo's open-source project, which allows developers to test various AI-related prompts and agents, comparing the performance of large language models, thereby fostering innovation in the AI sector.
- Funding Background: Promptfoo raised $18.4 million in Series A funding in July 2025, achieving a post-valuation of $85.5 million, indicating its potential and market appeal in the cybersecurity domain.
See More
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- Strong Revenue Growth: Zscaler's aggressive push into enterprise AI security has led to significant revenue growth, even as its stock remains below prior highs, reflecting market caution regarding its long-term potential.
- Expanding Recurring Revenue: The company is experiencing an increase in recurring revenue, indicating the sustainability of its business model and customer stickiness, which is expected to support future financial performance.
- Rising Enterprise AI Adoption: As enterprises increasingly rely on AI technologies, Zscaler's market opportunities are expanding, with expectations for further business growth and market share increase by 2026.
- Market Tension: Despite facing short-term market fears, Zscaler's long-term potential remains significant, and investors should monitor its strategic positioning in AI security and its impact on future stock prices.
See More
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- Strong Revenue Growth: Zscaler demonstrates robust revenue growth in 2026, even as its stock remains significantly below prior highs, indicating the company's potential is gradually becoming evident in the enterprise AI security space.
- Recurring Revenue Expansion: With rising enterprise adoption of AI, Zscaler's recurring revenue is also expanding, laying a foundation for the company's future financial stability and growth prospects.
- Market Competition Pressure: Despite Zscaler's aggressive push into AI security, the analyst team notes that it did not make the current list of top investment stocks, reflecting a cautious market sentiment regarding its future performance.
- Investor Focus: Zscaler's absence from the analyst-recommended top 10 stocks highlights investor concerns about its long-term potential, even as its strategic positioning in AI security could yield growth opportunities in the future.
See More
