Down as much as 55% from the peak to the trough and over 20% in 2026, it may be time to buy cybersecurity stocks like Palo Alto Networks (NASDAQ: PANW) and Zscaler (NASDAQ: ZS). While valuation concerns plagued and may continue to plague these markets, their share prices are trading at long-term lows and unlikely to fall significantly further.
Not only are their growth trajectories robust, but long-term forecasts likely underestimate their strengths in a world driven by accelerating digitization, penetration of digital services, regulatory requirements, and AI. While AI drives efficiency, automation, and results for businesses and enterprises, it’s doing the same for cybercriminals.
Palo Alto Networks and Zscaler are well-positioned within the industry. Their unified approaches provide comprehensive security within a highly fractured market. They enable vendor reduction, superior performance, enhanced threat detection/prevention/mitigation/recovery, scale, and margin.
They provide industry-leading gross and profit margins, with gross margins in the 70% to 80% range compared to legacy and hardware-based providers. Palo Alto, specifically, offers more than 20 products across cloud, networking, and systems security, while Zscaler is considered the leader in cloud-native, zero-trust architecture.
Oversold and Ready to Rebound, Palo Alto Networks and Zscaler Are Accumulated
The charts reflect oversold conditions in these stocks and a strong capacity to rebound. The monthly charts set the stage, reflecting the ultra-long-term secular trends. These charts show markets at long-term lows, with stochastic oscillators in the low-signal ranges or near historical lows, which tend to foreshadow a rebound. Coincidentally, price action on these charts also reflects support, as does other data.
The weekly charts are the same. They reflect markets that are oversold at a minimum, with Zscaler’s stochastic flatlined at its extreme low for several months while the moving-average convergence-divergence (MACD) quietly diverges. The divergence is slight but present, suggesting a market in which bears are losing their grip and bulls are beginning to gain control. Zscaler and Palo Alto reflect increased trading volume, showing someone is buying these shares at such low levels.
The daily charts also appear bullish when considering the signals from the monthly and weekly charts. They indicate that the markets have at least reached a bottom, if not their absolute lows, and suggest potential for a rebound. Both signals occur coincident with prior support/resistance targets, lending strength to the outlook. The indicators also align and are set up to trigger a strong buy signal, assuming price action advances again. In this scenario, the bottoms that are in play will be confirmed, and market reversals will become high-probability outcomes.
Valuation, Analyst Sentiment, and Institutional Activity Point to Cybersecurity Rebound
The valuation on these stocks remains high, with PANW trading near 40X its current year earnings outlook and Zscaler near 36X, but these are pricing in a robust growth outlook.
The cybersecurity industry is expected to grow at a 10% to 15% compound annual growth rate (CAGR) over the next decade, while leaders, such as Palo Alto and Zscaler, will grow at accelerated rates.
Palo Alto, the larger of the two, is forecast to grow at a high-teens CAGR and Zscaler at a low-to-mid 20% CAGR, putting them both in deep-value territory relative to the 2035 consensus.
In this scenario, these stocks trade at only 12X and 8X their long-term forecasts, suggesting a 100% upside for PANW and nearly 200% for Zscaler, just to align them with the broad market averages, as they grow into their forecasts. Assuming they continue to command a market premium, upside potential is greater.
Analysts played a role in the 2025 and 2026 stock price corrections. Collectively, price targets were reduced, placing these markets at the low end of the target ranges.
The story in early March 2026, however, is that the corrections are overblown and value is present. Zscaler trades significantly below the low-end of its target range, with potential for an 85% upside at consensus: Palo Alto is near the low-end, potentially a floor for the action, while consensus forecasts a 40% upside for it.
Institutional activity also aligns with the bottom for these stocks. Institutions sold heavily in Q3 2025, capping gains and driving prices lower, but reverted to buying in Q4 and early Q1 2026.
MarketBeat’s data reveal they have been accumulating at a pace of more than $2 bought for each $1 sold, providing solid support and a potential tailwind once the rebounds gain traction. Short interest is also noteworthy, as MarketBeat’s data reveals short-covering underway in both names.
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The article "2 Bad News Buys: Why Palo Alto and Zscaler Are Screaming Deals" first appeared on MarketBeat.
