Guggenheim upgrades Zscaler to Buy, raises target to $214

Guggenheim upgraded Zscaler to Buy from Neutral and set a $214 price target on Monday, sending the stock up about 10% to $154.11. The new target implies roughly 40% upside from recent levels and follows a 32% one-day drop on May 27 after the company reported quarterly results and issued guidance that disappointed investors.

Analysts John DiFucci and Lawrence Vensko cited Zscaler’s position in secure access service edge (SASE) and security service edge (SSE) as the foundation for the upgrade. They noted the company’s cloud-native platform could benefit as customers shift away from legacy hardware-based security and as demand for AI-related security features grows.

Investor concern focused on Zscaler’s guidance for fiscal 2027. Management projected revenue and annual recurring revenue growth of 16% to 17%, below the roughly 19% growth analysts had expected. Guggenheim acknowledged the softer outlook but argued the market reaction may have been excessive. The analysts wrote, “We believe the current level presents an opportunity to purchase a leader in an important, nascent security space at about the intrinsic value of the stock if it were run hyper-efficiently and never grew (or declined) again,” adding the case still depends on investor trust.

Guggenheim’s research pointed to a strong sales pipeline and a growing number of large enterprise opportunities. The firm also highlighted a shift in revenue sourcing: channel-sourced revenue fell to about 85% in the most recent quarter from roughly 96% in prior years, which the analysts said could reflect more direct enterprise sales.

AI security was central to the firm’s positive view. Zscaler has emphasized AI security in public statements and has been expanding its product set through acquisitions. The company announced plans to buy data security vendor Symmetry Systems and has previously acquired Red Canary, SPLX, SquareX and Avalor.

On the company’s earnings call, Chief Executive Jay Chaudhry stated, “Zscaler is ideally positioned as the cybersecurity platform for the AI era.”

Not all analysts share Guggenheim’s optimism. Morgan Stanley analysts led by Meta Marshall wrote that their April downgrade to Equal Weight was validated by the latest results, citing rising competition in the SASE market and saying the stock could remain “in the penalty box” until there is clearer evidence of customer traction for AI security offerings. Wells Fargo and Evercore ISI have trimmed price targets on concerns about the company’s slower growth outlook.

Despite Monday’s rebound, Zscaler shares remain down about 31% year-to-date in 2026, reflecting ongoing investor debate over how quickly the company can translate its AI security strategy into faster revenue growth.