Wells Fargo is moving off the sidelines when it comes to Zscaler . The bank upgraded shares of the cloud security stock to an overweight rating from equal weight. Analyst Andrew Nowinski simultaneously hiked his price target to $385 from $260. Shares of Zscaler have surged 67% in 2025. Nowinski’s new forecast is approximately 28% above where the stock closed on Thursday afternoon. ZS YTD mountain ZS YTD chart As a key catalyst, the analyst pointed to strong current momentum in Zscaler’s new and upsell business this fiscal year. Scheduled billings should become less of a headwind next year, while unscheduled billings growth should continue to improve from here. “We believe this will provide the foundation for 20%+ billings growth in FY26, as these unscheduled billings will become part of the scheduled billings,” he added. Zscaler seems to have a strong path toward reaching an annual recurring revenue of $5 billion in fiscal 2027, as long as it continues to maintain its mid-teens growth in core products, and strong growth in emerging products. As revenue growth accelerates, there is also room for Zscaler to continue expanding both its free cash flow and operating margins. “Zscaler introduced long-term financial targets for gross, operating, and free cash flow margin in 3Q23. The company is now at or above all three long-term targets, though they again reiterated those targets in the most recent investor deck in May 2025,” Nowinski said. “Nonetheless, we believe there is upside to both the operating and free cash flow margin targets going forward.” As these three investment points come to fruition, Nowinski believes the case for Zscaler shares to soar an additional 28% begins to look especially compelling. The stock rose 0.5% in premarket trading Friday. “While our valuation analysis is not a key thesis point, we believe it suggests shares are still undervalued relative to best-in-class stocks like CRWD, and we see room for further multiple expansion (on both an EV/Sales and EV/Free Cash Flow basis) as the company is following a similar path to $5B in ARR as CrowdStrike,” the analyst said. “If Zscaler can reach $5B in ARR over the next ~2.5 years (by FY27), we believe shares will begin to trade at parity with CRWD.”
