1 Magnificent Growth Stock Down 55% to Buy Right Now, According to Wall Street

1 Magnificent Growth Stock Down 55% to Buy Right Now, According to Wall Street

Anthony Di Pizio, The Motley Fool

Sat, September 12, 2026 at 10:35 PM GMT+3 5 min read

• ZS +0.65%
• NVDA -0.03%

Artificial intelligence (AI) is creating a painful cybersecurity headache for almost every business around the world. Hackers are using this technology to stage sophisticated attacks, and traditional defense mechanisms are struggling to keep up. But many businesses are also using AI software everyday, creating an entirely new set of vulnerabilities.

Zscaler (NASDAQ: ZS) was an early pioneer of the zero-trust cybersecurity architecture, and it has evolved to become one of the best defenses against AI-related threats. In simple terms, it makes valuable applications and data invisible to any user without authorized access to a given corporate network, and an attacker can't hit what they can't see -- not even if they are using an advanced tool like AI.

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The stock is still down 55% from its 2021 record high, when a frenzy in the tech market drove its valuation to an unsustainable level. But the majority of the analysts tracked by The Wall Street Journal have assigned it a buy rating, and not a single one recommends selling. Here's why their bullish consensus might be justified as AI adoption continues to ramp up.

Zero-trust cybersecurity is critical in the AI era

A zero-trust cybersecurity architecture treats every attempted connection to a corporate network as hostile, so absolutely no users receive automatic access. Zscaler's Zero Trust Exchange verifies each user by their login credentials, but it also analyzes the device they are using, and their location, which increases the odds of catching an imposter.

The Zero Trust Exchange doesn't stop there. It only connects each employee to the software applications they are authorized to use, so even if a hacker bypasses the identity security layer, they still won't have complete access to the corporate network. This limits the damage from a successful breach.

Earlier this year, Zscaler expanded the Zero Trust Exchange to protect organizations that are deploying AI agents. These agents often require access to critical applications and data within a corporate network so they can autonomously complete assigned tasks. That means if a hacker were to hijack one of them, they would immediately have access to all of those sensitive assets.

Zscaler introduced a feature called AI Broker, which monitors every communication between agents and strictly controls what they can access. Then there is the AI Registry, which gives human employees a clear overview of what assets each agent is permitted to use.

Finally, there is the AI Access Graph, which maps how identities, AI apps, and data sources connect across the corporate network. It quickly identifies agents that might have too much access for their assigned tasks, and it tracks the movement of data so human managers know if it's being fed into an unauthorized AI model.

Zscaler is coming off a record fiscal year

Zscaler generated a record $3.35 billion in revenue during its fiscal 2026 (ended July 31), a 25% increase from the previous year. It topped management's most recent forecast of $3.33 billion, a number that was lifted several times throughout the year.

The strong year was headlined by the growing adoption of what Zscaler calls a "Zero Trust Everywhere" philosophy, which is when customers deploy the zero trust architecture to protect their entire organization -- not just the identity and application layers. Zscaler had 950 customers in this category as of July 31, a whopping 171% increase from the same time last year.

With all of that said, Zscaler issued very conservative forward guidance for fiscal 2027, which points to revenue growth of around 17%. The company lost two important senior employees from its sales department a few months ago, which is likely to cause a disruption during the first half of the year. However, those employees have since been replaced, so there is a chance revenue growth will reaccelerate in the future.

Wall Street is bullish on Zscaler stock

The Wall Street Journal tracks 49 analysts who cover Zscaler stock, and 34 have given it a buy rating. Five others are in the overweight (bullish) camp, while the remaining 10 recommend holding. None recommends selling.

The analysts have an average price target of $207.40, suggesting Zscaler stock could climb by 25% over the next 12 months or so. The Street-high target of $250 implies an even greater potential upside of 50%.

I think both targets are achievable based on Zscaler's valuation. It's trading at a price-to-sales (P/S) ratio of 7.9, which is a steep discount to its three-year average of 13.2. Moreover, it's substantially cheaper than two of its biggest rivals in the cybersecurity industry, Palo Alto Networks and CrowdStrike, which have P/S ratios of 22.1 and 39.6, respectively.

ZS PS Ratio data by YCharts

From that perspective, Zscaler looks like a great buy right now. I'm not suggesting its P/S ratio will ever rise to the level of Palo Alto or CrowdStrike, but its stock would have to soar by 67% just to match its three-year average P/S ratio of 13.2. That alone would translate to a stock price of $277.

Back in May, AI powerhouse Anthropic published a white paper encouraging businesses to use a zero-trust architecture when deploying AI agents. Given that, Zscaler could experience explosive demand as enterprise adoption of agentic AI ramps up.

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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike and Zscaler. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.

1 Magnificent Growth Stock Down 55% to Buy Right Now, According to Wall Street was originally published by The Motley Fool