BofA Securities upgrades LegalZoom stock rating to Buy on subscription growth

Investing.com - BofA Securities upgraded LegalZoom.com Inc (NASDAQ:LZ) from Underperform to Buy on Friday, while raising its price target to $12.00 from $8.00. The stock, currently trading at $8.37, appears undervalued according to InvestingPro analysis, with impressive gross profit margins of 65.5% and a strong year-to-date return of 11.45%.

The upgrade comes as LegalZoom has successfully executed a substantial portion of its strategic shift toward subscription-based services, according to BofA Securities. The firm also noted that LegalZoom has added strategic artificial intelligence collaborations to its business model. InvestingPro data shows the company maintains a healthy balance sheet, holding more cash than debt, with a debt-to-equity ratio of just 0.08.

BofA Securities expects LegalZoom to sustain double-digit subscription revenue growth well into next year, as the company’s revenue growth has significantly exceeded the firm’s expectations. The strong performance suggests potential for multiple expansion given what BofA describes as a currently discounted multiple.

The firm highlighted the combination of accelerating growth alongside LegalZoom’s already-strong EBITDA margins of over 20% as key factors supporting the rating change. This financial profile positions the company favorably compared to peers.

BofA Securities also expressed confidence in LegalZoom’s free cash flow trajectory, noting it sees no slowdown in the company’s strong FCF performance, which further supports the more positive outlook on the stock.

In other recent news, LegalZoom announced its second-quarter earnings for 2025, revealing financial results that met and exceeded expectations. The company reported earnings per share (EPS) of 0.15 USD, which matched analysts’ predictions. Additionally, LegalZoom’s revenue reached 192.5 million USD, surpassing the anticipated 182.72 million USD by 5.35%. Despite these strong financial results, the company’s stock experienced a decline in aftermarket trading, indicating a mixed response from investors. These developments are part of the latest updates regarding LegalZoom’s financial performance.

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