Bernstein pivots on cybersecurity, favoring Zscaler's valuation upside while downgrading Palo Alto Networks due to integration costs and slowing growth comparisons.
Bernstein raised Zscaler's price target to $298 and maintained an Outperform rating, implying roughly 46% upside while the stock traded down in 2026.
Bernstein downgraded Palo Alto Networks to Market Perform, citing valuation and higher hurdles from integration costs and slowing growth comparisons.
Bernstein analyst Peter Weed has shifted his outlook on the cybersecurity sector, upgrading Zscaler to an Outperform rating with a $298 price target while downgrading Palo Alto Networks to Market Perform. The firm cites valuation concerns for Palo Alto, while noting that Zscaler's shift toward deeper customer relationships and stable retention rates creates a compelling case for a potential rerating.
The downgrade to Market Perform reflects concerns over valuation, rising integration costs, and increasingly difficult growth comparisons.
Bernstein believes Zscaler's transition to deeper customer relationships and its ability to drive growth through existing client product adoption justifies a potential rerating.