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Zscaler (ZS) shares ended deep in the red on April 9 after senior BTIG analyst Gray Powell issued a bearish note on the San Jose-headquartered cloud security company.
In a research note this morning, Powell downgraded ZS to “Neutral” and removed it from the firm’s first-half 2026 top picks list. BTIG no longer has a price target on the Nasdaq-listed firm, either.
Zscaler has been a disappointing investment this year, currently down about 48% versus its January high.
BTIG’s Bear Case for Zscaler Stock
Powell’s recent field checks warrant caution in buying ZS shares on the current dip. According to him, while near-term demand remains stable, feedback on the next six to 12 months was rather subdued.
Industry contacts pointed to mounting competitive pressures and a softer environment for acquiring new customers, which could weigh on future growth.
The two most notable competitive threats identified were Cloudflare (NET) and Netskope (NTSK).
Additionally, firewall vendors were found to be doing a better job upselling existing customers on their SASE capabilities, making incremental share gains more difficult for Zscaler to achieve.
All in all, the ZS platform story is not progressing as the firm had expected six months ago, Powell concluded.
ZS Shares Remain Unattractive in 2026
Industry contacts now see overall growth moderating to the mid-teens, versus expectations of some 30% previously, a sharp deceleration that could challenge ZS’s premium multiple.
Moreover, newer platform offerings such as Zero Trust Cloud, CASB, and RBI received mixed-to-negative feedback, making Zscaler shares even less attractive to own in 2026.
Other reasons the BTIG analyst cited for downgrading the cybersecurity stock include its negative operating and net margins, reflecting ongoing challenges in achieving profitability.
Finally, insider activity warrants caution in playing ZS. Over the past three months, executives have recorded three sales transactions but no purchases.
Note that Zscaler doesn’t currently pay a dividend to offset these risks either.
What’s the Consensus Rating on Zscaler?
Other Wall Street analysts, however, do not agree with Powell on Zscaler.
The consensus rating on ZS stock remains at a “Strong Buy,” with the mean price target of roughly $233, indicating potential upside of a whopping 90% from here.
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