By Kit Norton

Shares of Zscaler soared on Monday after Guggenheim handed the cybersecurity company a bullish upgrade as Wall Street appears to be buying Zscaler's artificial intelligence narrative.

Guggenheim analysts John DiFucci and Lawrence Vensko on Monday upgraded Zscaler to a Buy rating from Neutral with a $214 price target. That price target represents about 40% further upside.

The firm noted that shares are down dramatically since reporting earnings and guidance on May 26, but that this could offer investors a buying opportunity.

"We believe the current level presents an opportunity to purchase a leader in an important, nascent security space at about the intrinsic value of the stock if it were run hyper-efficiently and never grew (or declined) again," the analysts wrote.

The basis for this bullish belief is that Zscaler's cybersecurity offerings will grow in relevance in the AI era, especially with its secure access service edge technology, the cloud-based security and network connectivity architecture.

"We realize this is still a 'trust me story' but believe the valuation here presents an opportunity for those investors interested in a category leader of a still nascent and hyper growth market," DiFucci and Vensko added.

Zscaler stock gained 10% to $154.11 on Monday, on pace to close higher for a third consecutive trading session after plummeting 32% on May 27 following earnings.

Shares are in their best three day stretch since May 10, 2023, according to Dow Jones Market Data. Overall, Zscaler stock has dropped 31% in 2026 amid investor fears that AI could make some software offerings obsolete. However, prior to earnings, investor confidence in Zscaler appeared to be on the upswing, with the stock trading around its highest levels since February.

That came to a screeching halt after Zscaler on May 26 beat Wall Street's expectations with its fiscal 2026 third-quarter earnings but reported sales guidance that came in light.

"Zscaler is ideally positioned as the cybersecurity platform for the AI era," CEO Jay Chaudhry told analysts last month.

Zscaler has repeatedly highlighted AI security as one of its fastest-growing businesses. The company has also been working to beef up its AI security offerings and recently announced its intent to acquire data security vendor Symmetry Systems for an undisclosed amount. Zscaler has also acquired Red Canary, SPLX, SquareX, and Avalor over the past several years.

A Morgan Stanley analyst team, led by Meta Marshall, wrote on May 27 that they felt their Zscaler downgrade to Equal Weight in April was justified coming out of fiscal third-quarter earnings.

Marshall wrote that Zscaler is seeing increased competition in secure access service edge and that Zscaler stock could remain "in the penalty box" until there is further evidence of traction with the company's AI security operations products.

The Morgan Stanley analyst team added there is "no clear driver for now for the stock."

Write to Kit Norton at kit.norton@barrons.com

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June 01, 2026 12:25 ET (16:25 GMT)

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