Zscaler's stock has missed out on the cybersecurity sector's big rally this year - but it could soon get its moment in the spotlight

Bernstein analyst Peter Weed has an outperform rating on Zscaler's stock.

Cybersecurity stocks have been a hot trade this year, with investors reasoning that they could benefit from a rush of spending tied to artificial-intelligence threat risk.

But one analyst thinks that many of the most popular names will have trouble running up much higher from here.

In fact, the only cybersecurity stock Bernstein analyst Peter Weed now recommends is Zscaler (ZS), which has been a major laggard this year. He just downgraded shares of Palo Alto Networks (PANW), Okta (OKTA) and SentinelOne (S) (S) to "market perform," the equivalent of neutral - joining Cloudflare (NET), CrowdStrike Holdings (CRWD) and Fortinet $(FTNT)$, three cyber stocks that he previously rated at that level.

One reason Weed sees upside for Zscaler is that the company is emerging from a transition into a new sales model - a process that initially cost it some customers. He expects the company to be more stable this fiscal year, which runs through July, as the "sales motion change bears fruit," he wrote in a Thursday note.

Previously, Zscaler pursued a strategy of "opportunity-based selling" focused on finding new customers to buy its products, an approach that proved challenging as the market became more saturated. The company has been pivoting to a broader platform and strategy - a "relationship-based selling" approach, whereby it focuses on catering to existing customers and selling them new products.

Since hiring a new head of sales for its North America division in 2024, Zscaler has been making good progress executing this transition, Weed believes. That's shown by the fact that its net revenue retention rate - the percentage of revenue a company retains from its existing customers - remained strong at 115% throughout the 2026 fiscal year, which ended in July.

That said, he wrote that it could still take a few quarters for the company to "gain back investor trust" after losing some customers throughout the transition.

Zscaler's stock hasn't enjoyed the same AI-driven surge as shares of Palo Alto Networks and CrowdStrike, which have both roughly doubled so far this year. Shares of Zscaler have actually lost 11.5% over the course of 2026. But Weed seems ample upside from here, raising his price target on Zscaler's stock to $298, from $224, which implies room to run about 46% higher. He has a bullish outperform rating on the stock.

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On a relative basis, he thinks Palo Alto Networks, Okta and SentinelOne lack Zscaler's growth potential. Previously, Weed found their stocks "too cheap," but they now seem "fairly valued," he wrote. All three have staged major gains this year.

The analyst's thesis on these companies is in line with what he views to be a broader industry trend, which is that cybersecurity companies are still "accelerating nicely" but expectations may have gotten too high.

Cybersecurity may have "gotten over its skis," he noted, following a rush of AI-fueled optimism.

Of the three stocks he downgraded, Weed said that Okta has the most potential to positively surprise investors because of its AI-agent business, though it's difficult to assess the timing of when the business could scale given demand uncertainty.

Weed is concerned that an industry pricing trend may be overstating demand for cybersecurity products. A number of the major players have a pricing model that gives customers a license to use cybersecurity products and services up until a contracted value. These speed up the sales process for vendors by appealing to customers who can't predict what they need.

But in CrowdStrike's case, for instance, the pricing model may have contributed to growth in the company's annual recurring revenue beyond what Weed thinks would have been possible from true demand.

-Hannah Pedone