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On Thursday, Citizens JMP maintained a Market Perform rating on LegalZoom.com Inc (NASDAQ:LZ), with analyst Andrew Boone highlighting the company’s strategic advantage and current transitions. Boone noted LegalZoom’s significant role as the initial service chosen by approximately one-third of its business formation customers, underscoring its value. The company is also advancing its subscription services and focusing on high-value customers. With impressive gross profit margins of nearly 65% and five analysts recently revising earnings upward, the company shows promising fundamentals. However, Boone mentioned that due to the early stage of these strategic shifts and the competitive nature of the business formation sector, further evidence of progress is needed before adopting a more optimistic stance on the stock. According to InvestingPro analysis, LegalZoom appears to be trading below its Fair Value, suggesting potential upside opportunity.
LegalZoom has reported a stable annual retention rate of 63% as of December 2024, as revealed in their 10-K filing. The growth in subscription units during 2024 was attributed mainly to the bundling of e-signature, accounting solutions, and compliance subscriptions. The company’s revenue grew 3.2% in the last twelve months, reaching $682 million. This positive development was somewhat tempered by the company’s decision to stop acquiring new customers for its tax offering, which Boone pointed out as a factor offsetting subscription growth. InvestingPro subscribers can access 16 additional key insights about LegalZoom’s financial health and growth prospects through the comprehensive Pro Research Report.
The analyst’s reiteration of the Market Perform rating indicates a neutral perspective on the stock, suggesting that the company’s shares are expected to perform in line with the broader market. Boone’s comments reflect a wait-and-see approach, looking for more concrete signs of LegalZoom’s success in its business strategies before considering a rating change.
Investors and market watchers will likely monitor LegalZoom’s future performance closely, especially regarding its subscription model and customer retention strategies. The company’s ability to attract and maintain high-value customers while navigating the competitive landscape of business formation services will be crucial for its growth and stock performance.
In other recent news, LegalZoom reported a strong fourth quarter, surpassing earnings expectations with an EPS of $0.19, compared to the forecasted $0.16. The company’s revenue slightly exceeded projections, reaching $162 million, a 2% increase year-over-year. LegalZoom’s guidance for the first quarter of 2025 anticipates revenue between $175 million and $179 million, with adjusted EBITDA expected to be in the range of $33 million to $36 million. For the full year ending December 31, 2025, LegalZoom forecasts approximately 5% revenue growth with an adjusted EBITDA margin of around 23%. Additionally, LegalZoom announced the acquisition of Formation Nation, which is expected to positively contribute to adjusted EBITDA. Raymond (NSE:RYMD) James maintained a Market Perform rating on LegalZoom, noting the company’s strong performance driven by transaction and subscription growth. The research firm adjusted its revenue projections for LegalZoom, reflecting the Formation Nation acquisition and expected acceleration in subscription revenue growth. LegalZoom’s strategic focus on technology-augmented legal expertise is anticipated to drive further growth.
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