Zscaler is the IBD Stock of the Day for Thursday. Shares of the cybersecurity firm are approaching a cup base buy point amid a strong year. Shares are already above an early entry.
Zscaler stock has rallied 74% year to date. Shares have gained 12% since the company reported fiscal fourth-quarter earnings ahead of expectations early in September.
San Jose, Calif.-based Zscaler provides cloud-based cybersecurity services. It is a major player in securing corporate networks, including through an offering known as Secure Access Service Edge, or SASE. Zscaler competes in that market against Palo Alto Networks, Cloudflare, Fortinet and others.
ZScaler's Fiscal Q4 Results
In results reported Sept. 2, Zscaler said that its adjusted earnings climbed 23% year over year to 89 cents per share for its July-ended quarter, beating expectations. Revenue increased a stronger-than-forecast 21% to $719 million.
"Zscaler reported that ARR (annual recurring revenue) of $3 billion grew 22% year-over-year, similar to last quarter," BMO Capital Markets analyst Keith Bachman said in a client note following the report. "Net new ARR of about $200 million was strong, in our judgment, and grew 16% from $170 million a year ago, and improved from 6% last quarter."
Shares traded lower immediately following the report but have trudged higher in the weeks since.
Analysts are overall positive on the stock. Zscaler has 77% buy or equivalent ratings from the 47 analysts following the stock, according to FactSet. Otherwise, Zscaler has 10 neutral calls from analysts and one sell warning.
Jefferies analyst Joseph Gallo wrote to clients last week that industry check-ins indicated Zscaler and Palo Alto Networks are the top picks among customers for Secure Access Service Edge. Gallo rates Zscaler stock as a buy.
"We see SASE as a sizable market opportunity in its early innings (estimated just 26,000+ public vendor unified SASE customers) and expect ZScaler/Palo Alto Network/Cloudflare to benefit most near-term in our coverage," Gallo wrote.
Zscaler's adjusted earnings have increased an average of 22% over the past three quarters. For the company's July-ending fiscal 2026, analysts polled by FactSet are forecasting year-over-year adjusted earnings growth of 11%.
Zscaler Stock Near Buy Point
On the stock market today, Zscaler stock gained a fraction to close at 315.21. Shares are just below a 318.46 cup base buy point, according to IBD MarketSurge.
Zscaler fell to just below its 21-day moving average on Tuesday, then roared back with Wednesday's 7.2% gain. That cleared Monday's intraday high of 311, offering an early entry.
Meanwhile, Zscaler stock's Relative Strength score has ticked up in recent weeks to reach 86 out of a best-possible 99.
Further, Zscaler holds an Accumulation/Distribution Rating of B+, according to IBD Stock Checkup. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. A+ signifies heavy institutional buying, E means heavy selling.
Those scores contribute to Zscaler stock's strong IBD Composite Rating of 95 out of 99. IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Zscaler belongs to the IBD Computer-Software Security group, where its 95 IBD Composite Rating is the third best. It trails only Palo Alto Networks and CyberArk. CyberArk shares rallied in the summer after Palo Alto announced an agreement to acquire the company for $25 billion.
It has been a so-so year for the 36-stock cybersecurity group. Computer-Software Security ranks No. 97 out of 197 groups tracked by IBD, based on six-month price performance.
