Bernstein Stays Bullish on Zscaler With 46% Upside, Cuts Palo Alto

Bernstein is drawing a sharp line between two of the best-known names in cybersecurity. The brokerage still sees about 46% upside in Zscaler (ZS), while it has downgraded Palo Alto Networks (PANW), a split call that suggests the firm sees the sector's winners and laggards diverging.

The 46% figure is the gap between Zscaler's current share price and Bernstein's target. For a company of Zscaler's size, that is a large implied gain. It signals the analysts think the market is undervaluing the cloud security provider's growth prospects, even after the stock's earlier moves.

The Palo Alto downgrade points the other way. A rating cut from a major research house typically reflects a view that expectations have run ahead of what the company can deliver, or that the risk and reward no longer favor new buyers at current prices. The source item does not lay out Bernstein's full reasoning, so the specific drivers behind the downgrade are not detailed here.

The pairing is still notable. Zscaler and Palo Alto compete in overlapping parts of the security market, including cloud and network protection, as enterprises reshape how they secure remote users and applications. When an analyst favors one and steps back from the other, investors tend to read it as a view on relative positioning, not a verdict on the whole industry.

For investors, the takeaway is that cybersecurity is not being treated as a single trade. Demand for security spending remains a long-running theme, but Wall Street is increasingly picking among vendors based on valuation, growth durability and execution. Bernstein's stance puts Zscaler on the favored side of that sorting and Palo Alto on the cautious one.

As always, price targets are opinions, not guarantees, and they can change quickly with earnings, guidance or shifts in market sentiment. Investors weighing either stock should look at the company's own results and valuation, not rely on one analyst's call.