Tuesday, Mizuho (NYSE:MFG) Securities showed a positive outlook on shares of Zoom Video Communications (NASDAQ:ZM), increasing the price target to $105 from $90 while maintaining an Outperform rating. The adjustment followed Zoom's third-quarter financial results, which surpassed expectations with a $15 million revenue beat and free cash flow exceeding forecasts by $102 million.
The company's consistent profitability and robust cash flow were highlighted as it works towards reaccelerating its revenue growth. In response to the strong performance, Zoom has revised its full-year revenue growth forecast from 2.4% to 2.9%. The guidance for the fourth quarter suggests a year-over-year growth rate of 2.7%, which Mizuho considers to be conservative, potentially setting a baseline for growth in the coming year.
Analysts anticipate that Zoom will achieve mid-single-digit growth as its core platform stabilizes and new product offerings, such as Contact Center, Workvivo, and AI Companion, gain traction. These emerging products are seen as key drivers for the company's future expansion.
Looking further ahead, expectations are set for Zoom to capitalize on its substantial user base by cross-selling Zoom Contact Center. Moreover, there is potential for the company to start monetizing its artificial intelligence features through free-to-paid user conversions.
The revised stock price target of $105 reflects a valuation of 5 times enterprise value to next twelve months (EV/NTM) revenue and 14 times EV/NTM free cash flow. This valuation underscores the confidence in Zoom's growth trajectory and its strategic initiatives to diversify its product offerings and enhance its revenue streams.
In other recent news, Zoom has been the subject of multiple target price revisions following its third-quarter performance. Benchmark increased its target to $97, maintaining a buy rating, citing Zoom's expanding product offerings and reduced risk of competition. Rosenblatt Securities also raised its target to $95, maintaining a buy rating, following Zoom's impressive revenue and profitability results.
Zoom's third-quarter revenue saw a year-over-year increase of 4%, reaching $1.178 billion, with the company revising its revenue and profitability forecasts upward for fiscal year 2025. The company also announced the addition of Workvivo, an employee management platform, to its suite of services.
Stifel raised its price target for Zoom to $90, citing stable growth in both enterprise and online segments. The firm maintained a hold rating on the stock. Zoom's Board of Directors authorized an additional $1.2 billion for its share repurchase program, aiming to execute it by the end of fiscal year 2026.
Baird raised its target on shares of Zoom to $100, maintaining an outperform rating, following significant improvements in enterprise and total revenue growth. Meanwhile, Morgan Stanley (NYSE:MS) maintained an equal weight rating on Zoom with a steady price target of $86. These are recent developments in Zoom's financial performance and strategic initiatives.
InvestingPro Insights
Recent data from InvestingPro adds depth to Mizuho Securities' optimistic outlook on Zoom Video Communications (NASDAQ:ZM). The company's market capitalization stands at $27.4 billion, reflecting investor confidence in its growth potential. Zoom's impressive gross profit margin of 75.89% for the last twelve months as of Q2 2025 aligns with Mizuho's emphasis on the company's profitability.
InvestingPro Tips highlight Zoom's financial strength, noting that the company "holds more cash than debt on its balance sheet" and "liquid assets exceed short-term obligations." These factors support Zoom's ability to invest in growth initiatives like Contact Center and AI Companion, as mentioned in the article.
The stock's recent performance has been noteworthy, with InvestingPro data showing a 24.83% price return over the last three months and a 41.3% return over the past six months. This upward trend corresponds with the article's discussion of Zoom's improved revenue growth forecast and potential for mid-single-digit growth.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips on Zoom, providing a deeper understanding of the company's market position and financial health.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.