Zscaler stock price target lowered to $350 by UBS on conservative outlook

Zscaler (ZS) is experiencing mixed analyst sentiment, with UBS lowering its price target to $350 while maintaining a Buy rating, citing a conservative fiscal 2026 outlook despite strong current performance metrics. Although the company reported a significant Q4 FY25 EPS miss, its revenue and billings growth exceeded expectations, prompting multiple other firms, including Stifel, Evercore ISI, and Barclays, to raise their price targets, underscoring Zscaler's robust operational momentum and strong Annual Recurring Revenue growth.

Analysis

Zscaler (ZS) presents a mixed but fundamentally strong operational picture, characterized by a significant Q4 fiscal 2025 earnings per share miss of -$0.11 against a forecasted $0.80, which contrasts sharply with robust top-line performance. The company surpassed revenue expectations, reporting $719 million versus an anticipated $706.95 million, and demonstrated impressive momentum with 32% year-over-year billings growth and a 31% increase in Remaining Performance Obligations (RPO). This strength in underlying business metrics, including a high gross profit margin of 77.46% and successful customer adoption of its "ZT Everywhere" initiative, has led multiple analyst firms like Stifel, Evercore ISI, and Barclays to raise their price targets. Conversely, UBS trimmed its target to $350 from $365, citing a conservative fiscal 2026 outlook of 19% organic revenue growth, which it nonetheless deems an "attractive" setup. The guidance for the Red Canary acquisition's contribution to Annual Recurring Revenue (ARR) has also been revised downwards to a range of $83-$95 million from a prior $140 million, signaling either cautious forecasting or potential integration friction.

Key Decisions for Investors

• Investors should weigh the significant Q4 EPS miss against the very strong top-line metrics, such as the 32% billings growth and revenue beat, which suggest underlying business demand remains robust.
• The fiscal 2026 guidance of 19% growth is viewed as conservative by analysts; therefore, monitoring execution against this guidance in subsequent quarters is critical to assess if management is under-promising to over-deliver.
• Pay close attention to the integration and performance of the Red Canary acquisition, as the downwardly revised ARR contribution forecast could signal either a risk to M&A strategy or a future source of positive surprise.
• While fundamentals are strong, consider that the stock is noted as 'slightly overvalued' at its current price of $274.57, suggesting the positive outlook may be largely priced in, warranting a disciplined approach to entry points.