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Is Zscaler (ZS) Undervalued As Its Carahsoft Partnership Targets US SMB Growth?

Simply Wall St · 1d ago

Why the Carahsoft partnership matters for Zscaler stock

Zscaler (ZS) recently expanded its partnership with Carahsoft to take its Zero Trust Exchange deeper into U.S. small and mid sized businesses. Investors may see this as a meaningful distribution and channel development story.

Set against that news, Zscaler’s recent share price action has been strong in the short term, with a 30 day share price return of 24.59% and a 90 day return of 30.69%. However, the year to date share price return is down 14.59% and the 1 year total shareholder return is down 32%, which points to near term momentum improving after a tougher stretch for longer term holders.

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Bulls see Zscaler’s Carahsoft push, along with its double digit revenue and net income growth, as support for a richer multiple. Bears point to the recent share price rebound and ongoing losses. Which side does the current valuation favor?

Most Popular Narrative: 4.3% Undervalued

At a last close of $188.39, the most followed Zscaler narrative points to a fair value of $196.95 using an 8.69% discount rate, which implies modest upside and puts extra weight on how its security platform scales.

Explosive growth in AI/ML traffic and emerging threats is creating new security challenges that Zscaler is rapidly addressing with differentiated AI security and agentic operations products, positioning the company to capture a rising share of incremental cyber budgets and expand recurring ARR over the long term.

Read the complete narrative. Read the complete narrative.

Want to see what sits behind that valuation gap? The narrative leans on compound revenue growth, margin lift, and a premium earnings multiple. Curious which assumptions really move the fair value?

Result: Fair Value of $196.95 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, investors still need to weigh risks such as rising competition from larger security platforms and any slowdown in new customer wins that could challenge the Zscaler thesis.

Find out about the key risks to this Zscaler narrative.

Next Steps

With mixed sentiment around Zscaler after this Carahsoft update, it helps to check the key data points yourself and move quickly before views shift. Balance the potential upsides with the areas of concern by reviewing the 2 key rewards and 1 important warning sign

Looking for more Zscaler sized investment ideas?

You do not need to stop with Zscaler. Use the Simply Wall St Screener to spot other opportunities that match your risk profile and return goals.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.