Zscaler (ZS): A Contrarian Play at $220? Analysts See $235, Ignore the Noise

The recent $38 million insider sale of Zscaler (ZS) shares has sparked questions: Is this a red flag, or a buying opportunity in a cloud security leader? For contrarian investors, the answer lies in separating short-term noise from long-term fundamentals. With analysts targeting $235, strong technical support near $200, and a $34 billion market cap underpinning its dominance, now could be the time to take a position.

The Insider Sale in Context: A Normal Cycle, Not a Panic Button

On March 17, 2025, Ajay Mangal—a 10% shareholder of Zscaler—filed a Form 144 to sell 190,480 shares via Goldman Sachs, valued at ~$38 million. While this move might unsettle investors, it’s critical to note two key points:
1. Legal Compliance: Form 144 filings are standard for large shareholders selling restricted stock, ensuring transparency under SEC rules. Mangal’s sale followed trust reorganizations dating back to 2017 and 2019, suggesting tax or estate planning rather than a sell-off.
2. Minimal Impact: At 190,480 shares, this represents <0.1% of Zscaler’s total float. Mangal’s holdings dropped from 3 million to ~2.6 million shares—still a long-term stake.

The market’s reaction? Zscaler’s stock dipped briefly but rebounded to $223.85 the next day, underscoring investor confidence in the company’s fundamentals.

Analysts See $235—Why the Disconnect?

Analyst consensus is unambiguously bullish. Stifel’s $235 price target and Mizuho’s $210 reflect faith in Zscaler’s SaaS-driven growth. Even after Mangal’s sale, the stock trades below the $236.66 average target (as of March 1, 2025). Here’s why:

• Cloud Security Supercycle: Zscaler’s zero-trust architecture is a pillar of enterprise cybersecurity spending. With 80% of IT budgets shifting to cloud-native solutions, Zscaler’s 40%+ revenue growth (historical) is far from peaking.
• Margin Expansion: The company’s gross margins hit 81% in 2024, fueled by scale. Analysts project EBITDA breakeven by late 2025, unlocking free cash flow.

Technical Support: $200 Holds the Line

Zscaler’s chart offers a clear roadmap. Since its 2023 IPO, the stock has found support near $200—a level it briefly tested post-Mangal’s sale. A close above $225 could trigger a sprint toward $235, while a drop below $185 would signal deeper concerns. For now, the $200-$230 range looks like a buying zone.

Why Ignore the Noise?

The contrarian case hinges on three pillars:
1. Insider Activity ≠ Bearishness: Mangal’s sale is routine for a 10% holder. CEO Jagtar Chaudhry has never sold shares, and institutional ownership remains stable.
2. Valuation is Fair: At a forward P/S of 10x (vs. 12x for peers), Zscaler is undervalued given its 30%+ market share in CASB (cloud access security brokers).
3. Technical Buying Signal: The recent dip creates a “fear gap” that savvy investors can exploit.

Final Take: Buy the Dip, Ignore the Panic

Zscaler’s stock is down 10% from its 52-week high, but its core story—dominance in cloud security, robust margins, and analyst enthusiasm—remains intact. The insider sale is noise; the signal is clear: $220 is a compelling entry.

For investors prioritizing valuation, growth, and analyst consensus over short-term volatility, ZS is a contrarian buy now.

Risk Alert: Cybersecurity regulatory crackdowns or a prolonged tech sector slump could pressure the stock. Monitor Q2 earnings for margin progress.

Act now—before the crowd catches on.