Tuesday, Zoom Video Communications Inc. (NASDAQ:ZM) shares saw price target increased by Stifel to $90, up from the previous $70, while the firm maintained a Hold rating on the stock. The adjustment comes after the company's latest financial results, which showed a steady trend in both its Enterprise and Online segments.
The analyst from Stifel noted that Zoom's results did not come with significant surprises but indicated a continuation of stabilization trends. The Enterprise Net Retention Rate (NRR) observed in the quarter is expected to support mid-single-digit growth in that customer cohort. Despite the Online segment anticipated to continue impacting the overall business negatively, its significance to Zoom's growth is diminishing.
Zoom has been recognized for adding value to its paying customers, with the AI Companion feature being a prominent addition. This effort is reflected in the company's disclosure of a record low monthly churn rate for its Online segment.
5The analyst believes that while substantial growth above mid-single-digit seems unlikely in the near-to-mid-term, the stability across customer segments and the authorization of share repurchases in the billions support the stock's significant rise from its August lows.
Zoom's management has been active in repurchasing shares, a move that is seen as a positive sign by the analyst, especially considering the company's enterprise value (EV) of $20 billion. The share buyback authorization is perceived as a factor that justifies the stock's over 60% increase from its lowest point in August.
In summary, the updated price target reflects the analyst's view that Zoom's consistent performance and strategic initiatives warrant a higher valuation, despite the expectation for moderate growth in the near future. The hold rating suggests that while the analyst sees potential in the stock, investors may want to wait for further signs of acceleration in growth before considering an investment.
In other recent news, Zoom Video Communications reported a slight increase in its third-quarter earnings, exceeding its financial guidance with a 4% year-over-year growth in total revenue to $1.178 billion. This growth was seen in both enterprise and online customer segments. The company also highlighted progress in its emerging products, notably its Contact Center and Workvivo offerings, with the latter benefiting from a partnership with Meta (NASDAQ:META).
Baird raised the price target on shares of Zoom to $100 from $77, maintaining an Outperform rating. This followed Zoom's strong fiscal third-quarter results, which showed significant improvements in enterprise and total revenue growth. Morgan Stanley (NYSE:MS), Goldman Sachs (NYSE:GS), and Citi maintained their ratings, while Bernstein increased its price target for Zoom, citing growth in high-value customers and improved customer retention metrics.
Despite these positive developments, analysts from Goldman Sachs, Citi, and Bernstein expressed cautious stances due to concerns about the sustainability of revenue growth. Zoom's commitment to AI innovation is underscored by the introduction of Zoom AI Companion 2.0 and plans for industry-specific AI solutions. These are recent developments that investors should consider in their analysis of Zoom Video Communications.
InvestingPro Insights
Recent InvestingPro data and tips provide additional context to Zoom's financial position and market performance, aligning with the analyst's observations. As of the latest data, Zoom's market capitalization stands at $27.4 billion, with a P/E ratio of 31.17, reflecting the market's current valuation of the company.
InvestingPro Tips highlight Zoom's financial strength, noting that the company "holds more cash than debt on its balance sheet" and has "liquid assets exceed short term obligations." These factors support the analyst's positive view on Zoom's share repurchase program, as the company appears well-positioned to continue this strategy.
The company's "impressive gross profit margins" of 75.89% for the last twelve months as of Q2 2025 underscore Zoom's ability to maintain profitability, which is crucial as it navigates the stabilization trends mentioned in the article. Moreover, the "strong return over the last month" of 22.58% and "trading near 52-week high" (95.94% of its 52-week high) align with the analyst's observation of the stock's significant rise from its August lows.
InvestingPro offers 13 additional tips for Zoom, providing investors with a comprehensive view of the company's financial health and market position. To gain access to these insights and more, consider exploring the full range of data available on InvestingPro.
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