Research
Research Alert: CFRA Lowers Opinion On Shares Of Zscaler Inc To Hold From Buy
CFRA, an independent research provider, has providedwith the following research alert. Analysts at CFRA have summarized their opinion as follows:We lower our target price to $144, from $173, on a forward EV/S multiple of 5.5x our FY 27 (Jul.) sales projection of $3.923B, below its three-year average. We increase our FY 26 EPS estimate to $4.14 from $4.02, but cut our FY 27 EPS view to $4.57 from $4.60. ZS reported Q3 FY26 revenue of $850M, up 25% Y/Y, while ARR reached $3.5B with 25% Y/Y growth. Net new ARR of $166M grew 24% Y/Y, fueled by public sector strength and large deals in APJ (net new ARR of $153M, up 14% Y/Y excluding Red Canary). Non-GAAP operating margin expanded 140 bps Y/Y. Overall, Q3 results exceeded expectations. However, the firm's outlook and sales leadership departures temper our near-term view of the business. Management disclosed FY 27 ARR growth projections of 16% to 17% on the call, softer than anticipated, while reducing its FCF margin on higher capex pressures from hardware costs. We also note uncertainty on SecOps product demand and lagging new logo growth. In light of these execution headwinds, we lower our view to Hold.
$ZS