Zscaler's Insider Sales Clash with Analyst Optimism: A “Moderate Buy” Amid Contradictions

In the realm of cybersecurity stocks, Zscaler (NASDAQ: ZS) has been a standout performer in 2025, rising over 63% year-to-date despite a wave of insider selling that has raised eyebrows. The company's $6M sale by Director Andrew Brown and broader insider dispositions have sparked debate: Is this a warning sign, or an opportunity to buy the dip? Let's dissect the data.

The Insider Sell-Off: A Cause for Concern?

Recent SEC filings reveal a stark pattern of insider selling at Zscaler. Director Brown's $6M sale via a June 4 Form 144 filing—part of a prearranged Rule 10b5-1 plan—follows his April sale of 10,000 shares ($2.06M). Over the past two years, insiders have sold 450,568 shares, totaling $78.9M, with Brown alone netting nearly $3.35M in sales. While insiders often sell for diversification or tax purposes, the scale of these transactions is notable, especially amid a 18.1% insider ownership stake, suggesting some executives are trimming positions.

However, context matters. Brown's sale was triggered by the exercise of stock options, not a sudden loss of confidence. The Form 144 filings also indicate planned, non-speculative transactions—a defense against accusations of panic selling. Still, the cumulative effect of insider selling has unnerved some investors, particularly as shares trade at 13x forward sales, a premium to peers like Palo Alto Networks (PANW) or CrowdStrike (CRWD).

Analyst Sentiment: Bulls See a Cloud Security Leader

Despite the insider activity, analyst sentiment remains bullish. A January 2025 report by Goldman Sachs highlighted Zscaler's 25% annual revenue growth and its dominance in zero-trust architecture, forecasting $1.8B in 2025 revenue. The 12-month consensus price target has risen to $350, up from $280 in early 2025, reflecting confidence in its subscription model. Institutional ownership, while not explicitly detailed, is likely bolstered by Zscaler's strong YTD performance, which has outpaced the S&P 500 by a wide margin.

Technical Indicators: Overbought or a New Baseline?

Technical traders may argue that Zscaler's rise has pushed it into overbought territory. The RSI (14-day) briefly hit 75 in late May—a level often associated with short-term exhaustion—but remains within a bullish trend. Meanwhile, the 200-day moving average ($250) has acted as a support cushion, with recent dips failing to break it. However, the recent $300 price tag is 40% above its 2024 lows, raising questions about sustainability.

Valuation and Profitability: The Elephant in the Room

Zscaler's unprofitability remains a critical risk. Despite $1.4B in 2024 revenue, net losses widened to $244M due to aggressive R&D spending and salesforce expansion. While this investment could pay dividends in the long term, short-term investors may balk at a negative EPS of -$1.60. The stock's P/S ratio of 13x is rich for a company not yet cash-flow positive, making it vulnerable to macroeconomic slowdowns or investor sentiment shifts.

The Bottom Line: A “Moderate Buy” with Caveats

Zscaler presents a compelling contrarian opportunity for investors willing to look past near-term valuation concerns. The stock's strong fundamentals—including 25% revenue growth and a fortress-like moat in cloud security—align with long-term trends in remote work and hybrid IT. Institutional buying and rising analyst targets suggest confidence in its growth trajectory, even if insiders are trimming stakes.

However, the $6M insider sale underscores a key risk: Zscaler's reliance on continued execution in a crowded market. A misstep in product development or a pricing war could pressure margins. For now, the RSI and 200-day MA suggest a pullback is possible, but not inevitable.

Recommendation: Hold a “Moderate Buy” stance on Zscaler. Accumulate shares on dips below $275, but avoid chasing momentum near $300. Monitor Q2 earnings for signs of margin improvement and new customer wins. The stock's future hinges on translating top-line growth into profitability—a high bar, but achievable for a leader in its space.