Zscaler Surges 3.22% on Earnings Optimism and Analyst Upgrades Amid Cybersecurity Volatility

Summary
• Zscaler (ZS) trades at $317.84, up 3.22% intraday, with a range of $308.0 to $318.37
• Analysts raised price targets to $335–$351, while Zacks downgraded to 'Strong Sell'
• Earnings guidance and AI-driven security momentum clash with security breach concerns

Zscaler’s stock is surging amid a whirlwind of analyst upgrades and bullish guidance, yet faces headwinds from valuation concerns and a recent supply-chain breach. The cybersecurity leader’s 3.22% intraday gain reflects a tug-of-war between optimism over AI-powered zero-trust security and skepticism about stretched valuations. With a 52-week high of $319.89 in sight, investors are weighing forward-looking metrics against near-term risks.

Earnings Guidance and Analyst Hype Fuel Rally
Zscaler’s rally stems from a combination of upgraded analyst targets, strong forward guidance, and AI-driven demand. The company raised Q1 2026 EPS to $0.85–0.86 (vs. $0.49 consensus) and FY 2026 to $3.64–3.68 (vs. $2.23 consensus), driven by robust billings growth in AI security products. JPMorgan, RBC, and Wedbush raised price targets to $351, $335, and $330, respectively, while Jim Cramer highlighted its 51% YTD gain. However, Zacks Research downgraded to 'Strong Sell,' citing a 51% YTD rally as overvalued. A recent supply-chain breach via Salesloft Drift also introduced short-term volatility, though the stock remains buoyed by AI security momentum.

Cybersecurity Sector Gains Momentum as Zscaler Outperforms Peer PANW
The cybersecurity sector is showing resilience, with Zscaler outpacing sector leader Palo Alto Networks (PANW), which rose 1.45% intraday. ZS’s 3.22% gain reflects its leadership in AI-powered zero-trust security, while PANW’s more modest move highlights divergent investor sentiment. Analysts are rotating into ZS due to its forward guidance and AI integration, whereas PANW faces pressure from competitive dynamics and slower adoption of next-gen security solutions.

Options Playbook: Leveraging Bullish Momentum with Gamma-Driven Calls
• 200-day average: 250.94 (well below current price)
• RSI: 50.23 (neutral, no overbought/oversold signal)
• MACD: 4.83 (bullish divergence from signal line at 5.41)
• Bollinger Bands: Price near upper band at $318.47, suggesting overextension

Zscaler’s technicals point to a short-term bullish trend, with the 30-day support at $305.2 and 200-day support at $200.20 acting as critical levels. The stock is trading near its 52-week high of $319.89, with RSI and MACD indicating momentum but no immediate overbought conditions. The options chain offers two high-conviction plays for aggressive bulls:

• ZS20251031C310
- Type: Call
- Strike Price: $310
- Expiration: 2025-10-31
- IV: 43.49% (moderate)
- Leverage Ratio: 24.60% (high)
- Delta: 0.652 (moderate sensitivity)
- Theta: -1.30 (rapid time decay)
- Gamma: 0.017 (modest sensitivity to price changes)
- Turnover: $19,339
- Payoff at 5% Upside: $18.84 (max(0, 333.73 - 310))
- Why: High leverage and liquidity make this ideal for a breakout above $319.89, with theta decay favoring quick moves.

• ZS20251031C315
- Type: Call
- Strike Price: $315
- Expiration: 2025-10-31
- IV: 39.79% (moderate)
- Leverage Ratio: 34.23% (high)
- Delta: 0.566 (moderate sensitivity)
- Theta: -1.18 (rapid time decay)
- Gamma: 0.0198 (strong sensitivity to price changes)
- Turnover: $18,446
- Payoff at 5% Upside: $18.73 (max(0, 333.73 - 315))
- Why: High gamma and leverage make this ideal for a sharp rally, with liquidity ensuring smooth entry/exit.

Action: Aggressive bulls should target ZS20251031C310 into a break above $319.89, while ZS20251031C315 offers a higher-risk, higher-reward play if the 52-week high is cleared.

Backtest Zscaler Stock Performance
Key findings (2022-01-01 → 2025-10-23)• We detected 22 trading days on which Zscaler (ZS.O) closed ≥ 3 % above the prior-day close.• An event study over the subsequent 30 trading days shows: – Average cumulative return after 5 days ≈ +0.8 % (benchmark +0.4 %). – Average cumulative return peaks around day 17 at +3.3 %, then fades and turns negative after day 27. – Win-rate (share of events with positive return) never exceeds 64 %; it falls below 30 % by day 28. – None of the horizons reached statistical significance at the 95 % level.Interpretation1. Short-term follow-through is limited. A 3 % one-day surge in ZS has not been a reliable catalyst for continued strength; gains are modest and short-lived.2. Momentum dissipates after ~3 weeks. The median path rolls over, and average returns become negative beyond day 26.3. Risk/reward skew turns unfavorable late in the window, with declining win-rates and widening downside.Practical takeaway• Tactically, traders seeking to capitalise on ≥ 3 % up-days might consider tight profit targets within the first 1–2 weeks and avoid holding beyond day 20 unless broader signals support the trade.• For longer-horizon investors, the pattern offers little edge: the event has not delivered statistically significant outperformance versus a passive hold.Interactive resultSee the detailed event-backtest dashboard (interactive chart, distribution table, and individual-event drill-down) via the module below.Notes on assumptions• Price series uses daily close; intraday 3 % surge defined by close-to-previous-close ≥ 3 %. • Default 30-day event window adopted; adjust if you need a different horizon. • Statistical test: two-tailed t-test vs zero excess return; none passed 5 % threshold.Let me know if you’d like deeper cuts (e.g., varying thresholds, adding risk controls, or comparing to peers).

Zscaler at a Crossroads: Breakout or Correction?
Zscaler’s 3.22% rally is driven by AI security optimism and analyst upgrades, but valuation concerns and a recent security breach pose risks. The stock’s proximity to its 52-week high and strong gamma-driven options suggest a potential breakout, but a breakdown below $305.2 support could trigger a retest of the 200-day average at $250.94. Sector leader PANW’s 1.45% gain underscores the sector’s strength, but ZS’s AI-driven momentum may outpace peers. Watch for a $319.89 breakout or a breakdown below $305.2 to dictate next steps.