On Tuesday, Rosenblatt Securities adjusted its outlook on Zoom Communications (NASDAQ: ZM), increasing the stock's price target to $95 from the previous $78 while maintaining a Buy rating. The firm's decision follows Zoom's impressive third-quarter performance, which saw the company surpass expectations for both revenue and profitability.
Zoom Communications reported a year-over-year revenue increase of 4%, reaching $1.178 billion. This growth is attributed to the company's online business showing signs of stabilization and recording its lowest churn rate to date at 2.7%. In light of these results, Zoom has revised its revenue and profitability forecasts upward for fiscal year 2025.
The company's product offerings continue to gain traction, with the Zoom Contact Center customer base expanding to over 1,250, marking an 82% increase from the previous year. Additionally, Workvivo, another product in Zoom's portfolio, saw a 72% year-over-year growth. A significant achievement for the company this quarter was securing a large 20,000-seat contact center deal, highlighting Zoom's competitive edge in the enterprise market.
Zoom's Board of Directors has also shown confidence in the company's future by authorizing an additional $1.2 billion for its share repurchase program. This expansion brings the total repurchase plan to $2 billion, which the company aims to execute by the end of fiscal year 2026.
Based on these strong quarterly results, Rosenblatt has made a slight upward revision to its revenue forecast for Zoom and has rolled forward its valuation, leading to the new price target of $95. This adjustment reflects the firm's positive outlook on Zoom's financial health and market position.
In other recent news, Zoom Video Communications (NASDAQ:ZM) has seen several adjustments to its target stock price following its third-quarter earnings report. Stifel raised the target to $90, citing steady growth in both enterprise and online segments.
Similarly, Baird increased its target to $100, attributing this to significant improvements in enterprise and total revenue growth. Morgan Stanley (NYSE:MS) maintained an Equalweight rating with a steady price target of $86, while Goldman Sachs (NYSE:GS) kept a Neutral rating but increased the price target from $72 to $86. Citi also maintained a Neutral rating with an unchanged price target of $69.
Zoom's third-quarter earnings exceeded its financial guidance, reporting a 4% year-over-year growth in total revenue to $1.178 billion. The company's commitment to AI innovation is underscored by the introduction of Zoom AI Companion 2.0 and plans for industry-specific AI solutions. Additionally, the company showed progress in its emerging products, notably its Contact Center and Workvivo offerings, the latter benefiting from a partnership with Meta (NASDAQ:META).
These recent developments underscore the company's consistent performance and strategic initiatives, which analysts believe warrant higher valuations despite expectations for moderate growth in the near future. However, some analysts, including those from Goldman Sachs, Citi, and Bernstein, have expressed cautious stances due to concerns about the sustainability of revenue growth.
InvestingPro Insights
Zoom's recent performance and Rosenblatt's optimistic outlook are further supported by real-time data from InvestingPro. The company's market capitalization stands at $27.4 billion, reflecting its significant presence in the communication technology sector. Zoom's impressive gross profit margin of 75.89% for the last twelve months as of Q2 2025 aligns with one of the InvestingPro Tips, which highlights the company's "impressive gross profit margins."
The stock's recent performance has been particularly strong, with InvestingPro data showing a 22.58% price return over the past month and a 41.3% return over the last six months. This upward momentum is consistent with the InvestingPro Tip noting a "significant return over the last week" and "strong return over the last month."
Additionally, Zoom's financial health appears robust, with an InvestingPro Tip indicating that the company "holds more cash than debt on its balance sheet." This financial stability supports Zoom's ability to execute its expanded $2 billion share repurchase program.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Zoom, providing a deeper understanding of the company's financial position and market dynamics.
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