Morgan Stanley lifts Zscaler stock price target to $280

Morgan Stanley raised its price target for Zscaler (ZS) to $280 from $200, maintaining an Equalweight rating, citing strong performance and anticipated billing growth reacceleration, underscored by a 27.77% revenue increase and 77.86% gross profit margins. This follows Zscaler's Q3 earnings beat with revenue of $678 million (up 23% YoY) and EPS of $0.84, alongside an increased full-year revenue forecast and the $675 million acquisition of Red Canary. Analyst sentiment is mixed with BofA Securities and Bernstein raising their price targets, while Piper Sandler downgraded Zscaler to Neutral, reflecting caution despite a raised price target.

Analysis

Morgan Stanley has increased its price target for Zscaler (NASDAQ:ZS) to $280 from $200, maintaining an Equalweight rating, primarily due to better-than-expected performance across most metrics and an anticipated reacceleration in second-half billing growth. This optimism is supported by Zscaler's recent third-quarter 2025 results, where revenue reached $678 million, a 23% year-over-year increase, and earnings per share (EPS) came in at $0.84, beating the $0.76 forecast, leading to an upward revision of its full-year revenue forecast by approximately $17.5 million. InvestingPro data further highlights Zscaler's robust financial health with a 'GOOD' overall score, impressive revenue growth of 27.77%, and industry-leading gross profit margins of 77.86%; the company also shows a strong year-to-date return of 39.19% and a market capitalization of $38.85 billion. Key strategic developments include the announced $675 million acquisition of Red Canary, intended to bolster security operations capabilities, and an upcoming CFO transition, both noted as factors to watch. While these developments and strong performance have led BofA Securities to raise its price target to $285 and Bernstein to $251, Piper Sandler downgraded Zscaler's stock from Overweight to Neutral, despite raising its target to $260, citing concerns over recent stock price momentum and potential future challenges, aligning somewhat with Morgan Stanley's view that the stock is appropriately valued at current levels despite its positive trajectory.

Key Decisions for Investors

• Investors should closely monitor Zscaler's execution on integrating the Red Canary acquisition and the leadership transition with the new CFO, as these are pivotal for sustaining growth momentum and realizing strategic benefits.
• Given the significant 39.19% year-to-date stock appreciation and mixed analyst ratings, including Morgan Stanley's Equalweight stance and Piper Sandler's downgrade to Neutral, it is prudent to carefully assess the current valuation against future growth expectations.
• Consider the company's ability to maintain its high revenue growth (23% YoY in Q3) and strong gross profit margins (77.86%) in the face of ongoing strategic initiatives, potential integration challenges, and a competitive cybersecurity landscape.