B Riley starts Zscaler at Neutral, says stock fairly valued

Investing.com -- B Riley initiated coverage of Zscaler with a Neutral rating and a $275 price target, saying the cybersecurity provider is a leader in the fast-growing secure services edge market but the stock is already trading in line with peers.

The brokerage said Zscaler’s platform is well positioned as companies shift to zero trust security and adopt artificial intelligence, with sales execution helping it expand into a large underpenetrated customer base.

It forecast 23% annual recurring revenue growth and 26% free cash flow margins in fiscal 2025.

“The competitive landscape is intense, with larger platform providers leveraging product breadth and global distribution, as well as emerging vendors that are agile and leveraging differentiated technology,” analysts said.

But B Riley highlighted established rivals such as Palo Alto Networks and newer entrants including Netskope and Cato Networks.

After a 54% rise this year, compared with a 13% gain in the Amplify Cybersecurity ETF, the firm said Zscaler’s shares are fairly valued.

Its $275 price target assumes the stock trades at 56 times estimated 2027 earnings, a level broadly in line with other leading cybersecurity firms.

“We believe investors should wait for a pullback in ZS, for greater visibility into the competitive landscape, or for additional catalysts such as validation of Zscaler’s AI technologies or other new products,” analysts added.

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