ZS Should I Buy
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Zscaler Inc. (ZS) is not a strong buy for a beginner, long-term investor at this moment. Despite strong revenue growth and positive financial performance in Q2, the significant price drop (-13.83%) and bearish technical indicators suggest caution. Additionally, the options data indicates bearish sentiment, and the lack of strong proprietary trading signals further supports a hold stance.
The technical indicators for ZS are bearish. The stock is trading below its key moving averages (SMA_200 > SMA_20 > SMA_5), indicating a downtrend. The RSI is neutral at 53.958, and the MACD is positive but not strongly bullish. Key support levels are at 147.1 and 138.052, with resistance at 161.746 and 176.392. The stock is currently trading well below its pivot point, suggesting weakness.
Zscaler's Q2 revenue grew 25.91% YoY to $816 million, exceeding forecasts.
Net income improved significantly, up 344.23% YoY, and EPS improved by 320%.
Annual recurring revenue (ARR) grew 25% YoY to $3.4 billion, showcasing strong business momentum.
The stock dropped 13.83% in regular trading, reflecting negative sentiment despite strong earnings.
Analysts have broadly lowered price targets, citing market contraction and modest organic growth.
Bearish options sentiment and high implied volatility suggest caution.
Gross margin declined slightly (-0.69% YoY), indicating potential cost pressures.
Zscaler reported strong financial performance in Q2 2026, with revenue increasing by 25.91% YoY to $815.75 million. Net income improved significantly, reducing losses by 344.23% YoY to -$34.31 million. EPS also improved by 320% to -$0.21. However, gross margin dropped slightly to 76.55%, down -0.69% YoY.
Analysts remain generally positive on Zscaler, with most maintaining Buy or Overweight ratings. However, price targets have been significantly reduced across the board, reflecting market contraction and modest growth expectations. The average price target remains well above the current price, but the sentiment is cautious.
