What Happened?
Shares of cloud security platform Zscaler (NASDAQ: ZS) jumped 3.9% in the afternoon session after the stock was upgraded by analysts at Freedom Capital. The cybersecurity firm was upgraded from 'Hold' to 'Buy' by Freedom Capital Markets, which also raised its price target on the stock to $320 from $280. The upgrade came after Zscaler exceeded analyst expectations with its fourth-quarter performance, demonstrating resilient demand for its security solutions.
After the initial pop the shares cooled down to $288.16, up 3.4% from previous close.
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What Is The Market Telling Us
Zscaler’s shares are somewhat volatile and have had 12 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 9 months ago when the stock dropped 8.7% on the news that the company reported third-quarter (fiscal Q1'2025) earnings: What was less exciting was that the company gave revenue and adjusted operating profit for the next quarter that was only in line with expectations. It seems that for a high-multiple stock that's up nearly 15% in the last month (prior to the release of quarterly earnings), expectations were for more convincing guidance.
Also, CFO Remo Canessa announced his retirement, a development that always adds more uncertainty to guidance.
On the other hand, Zscaler beat on billings, revenue, adjusted operating profit, and adjusted EPS. The company also lifted full-year guidance across the board as well.
Overall, it was a solid quarter for the company, but the stock's reaction suggests markets were expecting more.
Zscaler is up 58.6% since the beginning of the year, and at $288.16 per share, it is trading close to its 52-week high of $316.50 from July 2025. Investors who bought $1,000 worth of Zscaler’s shares 5 years ago would now be looking at an investment worth $2,242.
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