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Scotiabank Maintains Zscaler Sector Outperform Rating, PT Drops to $334.
ByAinvest
Wednesday, Sep 3, 2025 9:34 am ET1min read
Scotiabank Maintains Zscaler Sector Outperform Rating, PT Drops to $334.
Scotiabank has maintained its sector outperform rating on Zscaler (NASDAQ:ZS) while reducing its price target (PT) to $334, as reported on September 2, 2025. The financial institution's analysts cited Zscaler's strong position in the Security Service Edge (SSE) market and its robust growth prospects as the primary reasons for the rating. However, the PT reduction reflects a more cautious outlook on the company's near-term earnings performance.Zscaler's recent acquisition of Red Canary, a managed detection and response (MDR) company, has been highlighted as a strategic move to bolster its security offerings and enter the growing MDR market. The acquisition, which closed on August 1, is expected to drive significant growth for Zscaler, particularly in the AI Security segment. Despite the positive impact of this acquisition, the company continues to face margin pressure from larger, bundled security vendors, which may extend its path to profitability.
The market sentiment towards Zscaler remains mixed. While the company's strong revenue growth and leadership position in the SSE market are seen as positive catalysts, the recent earnings miss and the persistent high operating expenses pose risks. Investors are closely monitoring the company's ability to convert its strong recurring revenue growth into sustainable profitability.
Scotiabank's PT reduction to $334 reflects a more conservative valuation, taking into account the recent earnings miss and the competitive landscape in the cybersecurity sector. The analysts maintain their sector outperform rating, acknowledging Zscaler's strong market position and growth prospects, but also cautioning about the challenges the company faces in achieving profitability.
References:
[1] https://seekingalpha.com/news/4491038-zscaler-rises-after-rating-upgrade-at-morgan-stanley
[2] https://www.investing.com/news/analyst-ratings/barclays-raises-zscaler-stock-price-target-to-320-on-strong-arr-growth-93CH-4220752
[3] https://simplywall.st/stocks/us/software/nasdaq-zs/zscaler/news/does-zscalers-zs-improving-revenue-guidance-offset-ongoing-l
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