Zscaler Stock Down Amid Market Concerns Despite Strong Buy Consensus

Zscaler's stock has fallen 8.15% amid market concerns. Despite a strong buy consensus among analysts, the stock's performance has been impacted by high valuations and insider selling. Analysts maintain a buy rating with price targets ranging from $315 to $365, reflecting optimism about the company's growth prospects. Concerns remain over the issuance of $1.725 billion in convertible senior notes and the company's lack of profitability.

Zscaler, Inc. (NASDAQ: ZS) has experienced a recent drop in stock price, falling by 8.15% amid broader market concerns. Despite a strong consensus among analysts, which includes a "Moderate Buy" rating with price targets ranging from $315 to $365, the stock's performance has been impacted by high valuations and significant insider selling [1].

Analysts maintain a buy rating, with eight equities research analysts rating the stock with a hold rating, twenty-eight with a buy rating, and one with a strong buy rating. The average 1-year price objective among brokers is $296.82 [1]. Rosenblatt Securities and Scotiabank have recently increased their price targets on Zscaler shares, with Rosenblatt Securities upping their target from $235.00 to $315.00 and Scotiabank from $310.00 to $360.00 [1].

However, high valuations and insider selling have weighed on the stock. Syam Nair, an insider, sold 28,947 shares of Zscaler stock at an average price of $250.00, and Ajay Mangal sold 120,000 shares at an average price of $300.89. These transactions, totaling $58,752,794, have contributed to the overall downward pressure on the stock [1].

Zscaler's recent earnings report showed $0.84 earnings per share (EPS) for the quarter, beating the consensus estimate of $0.76. However, the company reported a negative net margin of 1.52% and a negative return on equity of 0.59%. The company's revenue for the quarter was up 22.6% compared to the same quarter last year, but it remains unprofitable [1].

The stock's recent performance has also been influenced by the issuance of $1.725 billion in convertible senior notes, which could dilute earnings per share and impact the company's financial health. Additionally, the company's lack of profitability remains a concern for investors [1].

Despite these challenges, Zscaler's recent enhancements to its Zero Trust Exchange platform, including the launch of Zscaler Cellular, have bolstered the company's growth narrative. The company's strategic evolution in cybersecurity and its ability to capitalize on increasing demand for cloud security amid the expanding remote work landscape are positive factors [2].

Institutional investors and hedge funds have also shown interest in Zscaler, with several adding to their stakes in the company. Kozak & Associates Inc., ORG Partners LLC, SVB Wealth LLC, Goodman Advisory Group LLC, and N.E.W. Advisory Services LLC have all increased their holdings in Zscaler [1].

The company's performance will be crucial in achieving its strategic targets, including turning profitable by 2028. The stock's valuation, currently at $307.32, is slightly below the analyst consensus price target of $314.35, suggesting a marginal appreciation potential [2].

References:
[1] https://www.marketbeat.com/instant-alerts/zscaler-inc-nasdaqzs-receives-average-recommendation-of-moderate-buy-from-analysts-2025-07-12/
[2] https://simplywall.st/stocks/us/software/nasdaq-zs/zscaler/news/zscaler-nasdaqgszs-expands-zero-trust-exchange-with-launch-o