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On Thursday, BofA Securities updated its stance on Zoom Video Communications , Inc. (NASDAQ:ZM), increasing the price target from $79.00 to $84.00, while keeping a Neutral rating on the shares. Currently trading at $82.27, InvestingPro analysis suggests the stock is undervalued, with impressive gross profit margins of 75.79%. The adjustment follows Zoom’s recent financial report, which showed strong performance and a slight upward revision of its full-year 2026 constant currency revenue guidance.
The company’s guidance was modestly raised by 0.1%, representing a $15 million increase. This change was attributed to heightened revenue expectations for Zoom’s Online segment, specifically from a $1 price increase to monthly Pro subscriptions set to take effect in June. The new forecast suggests a $10 million to $15 million growth for the Online segment.
Despite the positive news from the Online segment, BofA Securities noted a subtle reduction in guidance for the Enterprise segment, which is of significant interest to investors. The management of Zoom acknowledged additional caution in their Enterprise outlook, citing longer sales cycles and increased scrutiny of deals among a subset of large customers. According to InvestingPro data, Zoom maintains excellent financial health with a "GREAT" overall score, supported by strong cash flows and minimal debt.
The report highlighted that while the Online segment is witnessing its lowest first-quarter monthly churn rate at 2.8%, an inflection in the Enterprise net dollar expansion rate (NDER) is yet to be seen. BofA Securities expressed that a 100%+ Enterprise NDER is not anticipated until the fiscal year 2027, thus reinforcing their Neutral rating on Zoom’s stock.
Zoom’s financial results and guidance updates are critical indicators of the company’s performance and future expectations, especially in the context of its Online and Enterprise segments. The company’s ability to reach a higher Enterprise NDER remains a focal point for analysts and investors alike as they assess Zoom’s long-term growth potential. For deeper insights into Zoom’s enterprise metrics and growth potential, InvestingPro subscribers can access the comprehensive Pro Research Report, which includes detailed analysis of the company’s competitive position and growth drivers.
In other recent news, Zoom Video Communications Inc. reported its first-quarter earnings for 2025, surpassing Wall Street’s expectations with earnings per share (EPS) of $1.43, beating the forecast of $1.31. Revenue for the quarter reached $1.17 billion, aligning with forecasts and marking a 3% year-over-year increase. Analysts from Evercore ISI maintained an Outperform rating on Zoom, with a price target of $115, highlighting the company’s operational execution and growth in new product offerings. The contact center business has become a significant growth driver, generating triple-digit millions in annual recurring revenue and expanding at 60% year-over-year. Goldman Sachs and JPMorgan also adjusted their price targets for Zoom, raising them to $87 and $85, respectively, while maintaining Neutral ratings. Despite these positive earnings results, Zoom’s guidance for the Enterprise segment was effectively reduced due to a challenging macroeconomic environment. On the other hand, Zoom raised its full-year revenue guidance to $4.8-$4.81 billion, reflecting confidence in its strategic initiatives, including AI and platform expansion. The company continues to focus on small-to-medium-sized acquisitions that align with its product and talent goals.
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