Beating The Bull begins coverage of Zscaler with a Watchlist rating and an investment score of 64 out of 100. The shares closed at $193.05 on 25 September, down 10.1% on the day after the company said its Chief Revenue Officer would step down. The probability-weighted fair value is $186, so the stock trades close to what the business is worth today. The price of interest is about $160.

Zscaler is a strong franchise going through a growth reset. The fiscal year to July ended with revenue up 25% to $3.35 billion, gross margin of 80% and net revenue retention steady at 115%. Management has guided fiscal 2027 revenue and ARR to grow only about 17%, and the pace excluding the Red Canary acquisition was already near that level in the fourth quarter.

Reasons to worry:

1. The sales machine is being rebuilt. Mike Rich leaves the CRO role on 1 October, following a geography leader and a vertical leader who left earlier in the year.
2. Stock pay swallows the cash margin. Stock-based compensation of $822 million in fiscal 2026 exceeded free cash flow of $779 million.
3. Consolidation favours bigger platforms. Palo Alto Networks now says it is number two in SASE and bundles far more products into one deal.

Reasons the selling looks overdone:

1. The successor is internal. Ross Tackett has run worldwide sales for three years, and the fourth quarter delivered what management called record sales productivity.
2. The valuation is modest for the category. Enterprise value is about 7.6 times fiscal 2027 revenue guidance, against roughly 21 times at Palo Alto and 44 times at Cloudflare.
3. AI security is gaining traction. Security for AI bookings rose more than 50% sequentially in the fourth quarter, and the Agentic SOC launched on 9 September.

The base case, with fiscal 2028 revenue of about $4.55 billion at 6.5 times sales, is worth about $185. A bull case with growth back near 20% reaches $246, while a bear case in which the sales turnover costs two or three quarters of pipeline falls to $129, a third below the current price. The first real evidence arrives with first-quarter results, expected in late November or early December.

At $160 the stock would trade near 6.2 times fiscal 2027 revenue and 33 times guided earnings, with about 16% upside to the base case. A clean first quarter with the ARR guide held would justify stepping in closer to $175.

Scenario tables, the leadership-change sizing and the full scorecard are in the complete Zscaler (ZS) report on our Reports page.