JMP maintains Market Perform rating on LegalZoom stock amid strategic shifts

Investing.com - JMP Securities has reiterated its Market Perform rating on LegalZoom.com Inc (NASDAQ:LZ) on Friday, citing the company’s strong brand position but ongoing strategic challenges. The company, currently trading at a P/E ratio of 53.5x, has demonstrated impressive financial performance with gross profit margins of 65.5% and annual revenue of $691 million. According to InvestingPro analysis, LegalZoom appears to be trading above its Fair Value.

The research firm acknowledged LegalZoom’s strategic positioning, noting it is the first service for approximately one-third of its business formation customers and maintains about five times the brand awareness of any competitor in the space.

JMP pointed to early-stage efforts to focus on high-value buyers and highlighted that second-quarter 2025 business applications suggest a healthy formation environment for the legal services platform.

The firm expressed concern about LegalZoom’s decision to reverse its freemium strategy, suggesting this change will increase pressure on the company to differentiate its product offerings as competition remains robust, evidenced by declining website traffic share.

JMP maintained its Market Perform rating, describing the risk/reward balance in LegalZoom shares as "balanced" while awaiting "greater clarification on whether this strategy can result in sustained growth going forward."

In other recent news, LegalZoom.com Inc. reported its first-quarter 2025 earnings, achieving an earnings per share of $0.13, which met analyst expectations, and surpassing revenue forecasts with $183.1 million. This represents a 5% increase in revenue year-over-year, driven by an 8% rise in subscription revenue, now accounting for over 60% of the company’s business. LegalZoom also saw a significant improvement in adjusted EBITDA, up 33% year-over-year, indicating enhanced operational efficiency. The company reaffirmed its full-year revenue growth target of approximately 5% and expects double-digit subscription revenue growth by the fourth quarter of 2025. Additionally, JPMorgan has increased its price target for LegalZoom to $12.00 from $11.00, maintaining an Overweight rating on the stock. The firm expressed confidence in LegalZoom’s potential to outperform market expectations for revenue and earnings. LegalZoom’s strategic changes and focus on subscription revenue growth are seen as pivotal in enhancing its market position and investment appeal.

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