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Tuesday, Bernstein SocGen Group maintained its Market Perform rating on Zoom Video (NASDAQ:ZM) shares with an unchanged price target of $89.00. According to InvestingPro data, Zoom is currently trading at $73.46, with analysis suggesting the stock may be undervalued. The company maintains impressive financial health metrics, earning a "GREAT" overall score from InvestingPro’s comprehensive assessment. Analyst Peter Weed provided an overview of the company’s performance, noting the narrowest beat in recent quarters at 0.6%, or 0.9% factoring in foreign exchange headwinds, for the fourth fiscal quarter of 2024. Looking ahead, Zoom’s guidance for fiscal year 2026 suggests an approximate 3% growth rate, which may be slightly lower with foreign exchange considerations or slightly higher without them.
Zoom’s conservative forecast sets the stage for potential overachievement, yet even with expected beats, the analyst predicts full-year growth to hover around 4%, a modest increase from this year’s estimated 3%. While growth remains modest, InvestingPro data reveals the company maintains robust gross profit margins of 75.83% and strong liquidity with a current ratio of 4.6. The challenge for Zoom lies in reigniting growth, with the online segment of its business, which accounts for about 40% of revenue, showing approximately 0% growth, and a smaller enterprise segment growing in the low single digits. Get access to 7 more exclusive InvestingPro Tips and detailed financial metrics with an InvestingPro subscription. These factors limit the growth potential of Zoom’s more than $100K enterprise customers, which the company highlights as a strong and growing customer base.
Weed adjusted the net revenue retention (NRR) growth curve slightly downward to align with the most recent trajectory. The valuation remains grounded in a 50/50 discounted cash flow model, assuming a 0% terminal growth rate and an 11% weighted average cost of capital, reduced from 12%. The price to next twelve months (NTM) revenue multiple is set at 5 times, supporting the $89 price target and Market Perform rating.
Zoom, known for its video conferencing services, has been navigating a post-pandemic market where the demand for such services has normalized. The company’s efforts to sustain growth amidst changing market conditions remain a focal point for analysts and investors alike. For deeper insights into Zoom’s valuation and growth prospects, check out the comprehensive Pro Research Report available exclusively on InvestingPro, part of our coverage of over 1,400 top US stocks.
In other recent news, Zoom Video Communications Inc. reported its fourth-quarter earnings for 2025, surpassing expectations with an earnings per share (EPS) of $1.41, compared to the forecast of $1.30. Revenue for the quarter was $1.184 billion, aligning with predictions and marking a 3% year-over-year increase. The enterprise segment contributed significantly to this growth, despite a modest annual dip in total enterprise customers by 0.5%. Zoom’s enterprise revenue, which constitutes 60% of total revenue, grew by 6%, driven by larger deals and increased adoption of its services by enterprise customers.
Analysts from Cantor Fitzgerald, RBC Capital Markets, and Piper Sandler provided their assessments following the earnings report. Cantor Fitzgerald maintained a Neutral rating with an $87 price target, noting the balance of strengths and weaknesses in Zoom’s performance. RBC Capital Markets reaffirmed their Outperform rating with a $95 price target, expressing confidence in Zoom’s conservative outlook despite a slight downward adjustment in fiscal year 2026 projections due to foreign exchange fluctuations. Piper Sandler also reiterated a Neutral rating with an $89 target, highlighting Zoom’s revenue growth driven by new products and partnerships, though expressing a preference for other companies in the sector.
Zoom plans to introduce a customized AI Companion in the second half of fiscal year 2026, with long-term growth expected to be driven by artificial intelligence. The company’s management is scheduled to engage with investors at the Enterprise Connect conference in March 2025, providing further insights into its strategic direction. Despite these positive developments, the guidance for fiscal year 2026 was adjusted downward, primarily due to foreign exchange rates and seasonal trends.
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