1 Spectacular Growth Stock Down 44% to Buy Right Now, According to Wall Street

Cybercrime is on track to cause $10.5 trillion worth of damage to the global economy in 2025, according to Cybersecurity Ventures. More businesses are operating online than ever before, which leaves them vulnerable to attackers who can strike at any time of the day, and from anywhere in the world.

Zscaler (NASDAQ: ZS) is a leader in zero-trust cybersecurity, and it has observed a whopping 111% increase in spyware attacks over the past year alone. It's a dangerous type of software that infects computers and steals sensitive data like financial information or the credentials of important employees, and Zscaler can help prevent the fallout.

Zscaler stock is down 44% from its all-time high, which was set during the tech frenzy in 2021, but that hasn't deterred Wall Street. Here's why investors might want to follow their lead.

A leader in zero trust cybersecurity

Technologies like cloud computing allowed businesses to tap into a global customer base and hire employees from a global pool of talent. Both of those things are great, but they also come with risks. Managers now have to monitor workers who might be in an entirely different country, so they can't physically see them accessing company networks or sensitive data.

As a result, there is no way to know whether a remote worker is making a genuine sign-on attempt, or if their credentials were stolen. Traditional cybersecurity software can't protect against such threats, so that's where Zscaler's Zero-Trust Exchange platform comes in. It starts by treating every login attempt as hostile, analyzing not only the person's username and password, but also their location and the device they are using, to make sure it's really them.

Moreover, Zscaler only connects the employee to the digital applications required for their job. Therefore, even if a malicious actor breaches the identity layer, they can't access the organization's entire network or compromise sensitive data.

Artificial intelligence (AI) plays a key role on Zscaler's platforms, because it allows tasks like identity verification to be completed in seconds. However, the company is also expanding its product portfolio to include protection for companies using AI. With Zscaler, organizations can securely deploy AI copilots, chatbots, and virtual assistants with confidence thanks to new tools that restrict their access to sensitive information and prevent data leaks.

Overall, Zscaler stops more than 9 billion security violations a day. That's an impressive number, but it's also frightening because it highlights how frequently organizations are at risk.

Image source: Getty Images.

Strong revenue growth and improving profitability

Zscaler generated a record $628 million in revenue during its fiscal 2025 first quarter (which ended Oct. 31). It was a 26% increase from the year-ago period, and it was also comfortably above management's forecast of $605 million.

The strong result prompted management to increase revenue guidance for the fiscal 2025 full year. It now expects to deliver $2.63 billion (at the midpoint of the guidance range), up from the $2.61 billion forecast three months earlier.

Zscaler also made progress on the bottom line thanks to its strong revenue growth combined with careful expense management. The company still lost $12 million on a generally accepted accounting principles (GAAP) basis, but that was a 64% reduction from the $33.5 million net loss it delivered in the same quarter last year.

On a non-GAAP (adjusted) basis, which excludes one-off and noncash expenses like stock-based compensation, Zscaler actually generated a profit of $124.6 million. That was a 43% jump from the year-ago quarter.

Zscaler is trying to balance growth and profitability to build a more sustainable business for the long term. It's a big shift from the growth-at-all-costs strategy it adopted a few years ago, which is part of the reason its stock is down from its 2021 record high. But the company still has the potential to deliver steady returns for investors.

Wall Street is bullish on Zscaler stock

The Wall Street Journal tracks 45 analysts who cover Zscaler stock, and 26 have given it the highest possible buy rating. Four more are in the overweight (bullish) camp, while 15 recommend holding. Not a single analyst recommends selling.

The analysts have a consensus price target of $224.47, which implies an upside of 9% over the next 12 to 18 months from where Zscaler stock currently trades. However, the Street-high target of $270 suggests the stock could climb by 31%.

Over the longer term, I think Zscaler could perform even better for two key reasons. First, the stock trades at a price-to-sales (P/S) ratio of 13.6, which is significantly below its average of 26.9 dating back to when the company went public in 2018.

ZS PS Ratio data by YCharts

Zscaler stock would have to nearly double just to move in line with that average. I'm not suggesting it will happen, because a P/S ratio of 26.9 would make Zscaler even more expensive than CrowdStrike, which is one of the most popular cybersecurity vendors in the world because of its all-in-one Falcon platform. With that said, it's clear there is room for upside in Zscaler's valuation.

The second reason I think Zscaler stock could eventually move higher than Wall Street's price targets is because of the company's addressable market, which it values at $96 billion across Zero Trust, data protection, and AI solutions. Based on the company's current revenue, it has barely scratched the surface of that opportunity.

Cybercrime is on track to cause a record amount of damage next year, so cybersecurity spending is likely to continue trending higher. As a result, Zscaler stock might be a great buy right now especially considering its current valuation.

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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 has a disclosure policy.