Zscaler enters the back half of July with one of the sharpest short-covering episodes in the cybersecurity sector — a 32% collapse in short interest in a single week that tells a cleaner story than the stock price alone.
The repositioning in the borrow market is the week's defining move. Short interest dropped from roughly 11 million shares to 7.6 million between July 9 and July 14 — a decline of nearly 3.4 million shares in five sessions. That brings short interest to 4.8% of the free float, down from around 8.3% just six weeks ago. The covering has been orderly rather than panicked: cost to borrow remains negligible at 0.44%, barely above where it was a month ago, and availability has opened up dramatically. Availability now runs at 4,033% — meaning there are roughly forty shares available to borrow for every one currently lent out. That is the loosest the lending market has been in at least a year, a reversal from the tighter conditions that prevailed through most of June when availability was below 1,000%. Shorts that wanted out found it easy to exit, and those who want to rebuild a position have no shortage of supply.
Options positioning tells a slightly more cautious story, though not dramatically so. The put/call ratio has edged up to 0.78, running close to two standard deviations above its 20-day average of 0.71 — the most defensive options posture of the past month. That's still well short of the 52-week high of 1.07, so it reads less as outright hedging and more as a modest tilt toward protection after the stock's 7.2% single-day gain on July 14 and a 17% rally over the past month to $152.09.
The Street remains broadly constructive, though targets cluster meaningfully above the current price. The consensus is a buy, with a mean target around $193 — implying roughly 27% upside from here. Most recent activity since the May earnings print has been target maintenance rather than fresh upgrades; Keybanc trimmed its target to $176 from $190 in late June while keeping an Overweight rating, a small signal of reduced conviction post-earnings rather than a directional shift. The bull case rests on Zscaler's zero-trust platform leadership, accelerating AI-driven security spend, and improving operating leverage. Bears point to customer retention friction, AI governance risk, and a valuation that — even after de-rating — still prices in considerable execution. The P/E has compressed sharply over 30 days, down nearly 14 turns to 29x, and price-to-book has shed over 3 points to 7x, reflecting the post-earnings reset after a 31% single-day drop on May 26. Forward EPS momentum over 12 months ranks in the 87th percentile, an unusually strong growth signal that helps justify premium multiples even in a tougher tape.
The earnings history adds important texture. The May 26 print was brutal — the stock fell 31% the next day and was still down 21% five days later. That shaped much of the elevated short interest that has since unwound. The prior print, in late May 2026 (Q3 results reported on May 29), produced the opposite: a 20% next-day gain. That kind of binary volatility explains why options traders are adding modest put protection even as shorts retreat — the next earnings event is scheduled for September 1, and the setup will matter.
With the ORTEX short score dropping from 48 in early July to 40.6 today, and availability fully open, the near-term question for ZS is whether the covering reflects genuine fundamental re-rating or simply position-squaring ahead of a summer with little immediate catalyst — and how the September 1 print, against a now-higher stock and leaner short base, recalibrates the trade.
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