Mizuho Upgrades Zscaler to Outperform After Sharp Share Pullback

Core Viewpoint - Mizuho upgraded Zscaler to Outperform from Neutral with a price target of $310, citing an improved risk-reward profile after a significant stock decline [1] Group 1: Stock Performance and Analyst Insights - Zscaler shares have weakened significantly despite a solid fiscal first-quarter performance, with fiscal second-quarter net new ARR guidance slightly below prior levels [2] - The recent acquisition of Red Canary did not contribute to the guidance, indicating a need for greater transparency regarding Zscaler's organic growth outlook [2] - The stock has declined approximately 31% since the end of October and 21% since the fiscal first-quarter earnings, suggesting that investors are now well compensated for the uncertainty [3] Group 2: Market Position and Valuation - Mizuho remains confident in Zscaler's strong positioning within the SASE and Zero Trust markets [3] - Zscaler is trading at a peak year-to-date EV-to-ARR discount relative to peers, highlighting a favorable valuation [3] - The company has a superior Rule of 50 score compared to many other high-growth software companies, reinforcing its competitive advantage [3]