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On Tuesday, JPMorgan analyst Ella Smith increased the price target on LegalZoom.com Inc (NASDAQ:LZ) to $11.00, up from the previous $9.00, while continuing to recommend an Overweight rating for the company’s stock. Currently trading at $9.39, InvestingPro analysis suggests the stock is undervalued. This adjustment follows LegalZoom’s announcement of the acquisition of Formation Nation, a move set to expand its small business subscription solutions. LegalZoom also provided a sneak peek at its preliminary fourth-quarter results for 2024, which are expected to bolster investor confidence in the stock.
LegalZoom’s preliminary figures for the fourth quarter of 2024, disclosed after the market closed on Monday, showed adjusted EBITDA at the high end of the company’s guidance range. Free cash flow (FCF) was reported to be more than double the implied guidance range and consensus estimates. The company maintains impressive gross profit margins of 64.14% and generated $78.19 million in levered free cash flow over the last twelve months. These results point to LegalZoom’s growing trend of recording high adjusted EBITDA and FCF margins, indicating a strong financial performance.
The positive momentum for LegalZoom has been noticeable since JPMorgan upgraded the stock to Overweight on January 13, 2025. Smith emphasized that LegalZoom shares have the potential to appreciate further as the market begins to recognize the company’s cash generation capabilities. Year-to-date, LegalZoom shares have seen a notable increase of 23%, outperforming the S&P 500’s rise of 3%.
In light of the preliminary fourth-quarter results for 2024, JPMorgan has revised its price target upwards by approximately 20% to $11 per share. Smith reiterated the Overweight rating, signaling confidence in LegalZoom’s continued growth and profitability. The acquisition of Formation Nation, coupled with strong financial performance, is expected to contribute positively to LegalZoom’s market position and shareholder value. InvestingPro subscribers have access to 16 additional investment tips for LegalZoom, including detailed insights about the company’s financial health score and comprehensive research reports that transform complex data into actionable intelligence.
In other recent news, LegalZoom.com, Inc. has reported significant developments. The company has recently acquired Formation Nation, a small business services specialist, in a deal valued at $49.3 million and 2.2 million shares of restricted stock. The move is expected to bolster LegalZoom’s service offerings and improve its customer service capabilities. This acquisition follows the company’s recent financial results for the year ended December 31, 2024, which showed revenues of $681.9 million and net income of $30.0 million.
LegalZoom has also made changes to its executive team, appointing Charles Thomas as its new Chief Accounting Officer. Thomas, previously of Veritone (NASDAQ:VERI), Inc., brings a wealth of experience to the role and is expected to contribute significantly to the company’s operations.
In terms of analyst coverage, JMP Securities has maintained its Market Outperform rating on LegalZoom, citing the company’s leading market position. JPMorgan upgraded the company’s rating to Overweight, anticipating strong business formation data and a higher than expected EBITDA guidance for 2025. Meanwhile, UBS has initiated coverage of LegalZoom with a Neutral rating and a price target of $9.00. These are some of the recent developments that investors should be aware of.
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