Investing.com -- Jefferies lifted its rating on Zoom Video Communications (NASDAQ:ZM) shares to Buy from Hold, highlighting “multiple reasons for optimism” for the company’s prospects heading into 2025.
The investment bank also raised its price target for the stock to $100 from $85, based on an expected improvement in revenue growth and the company’s integration into enterprise workflows.
Zoom shares climbed over 2% in premarket trading Thursday.
The upgrade reflects Jefferies’ view that Zoom’s plan to monetize product innovations, particularly through the launch of its AI Companion Add-On in the first half of 2026, represents a positive strategic shift. According to the firm’s analysts, even a modest adoption rate of this new feature could significantly accelerate revenue growth.
“We estimate there are 32m+ total enterprise seats assuming the avg user pays just $7 per month. If just 5% of these seats purchased the AI Add-On in FY26, it would drive a bull case scenario where total rev growth accelerates,” analysts led by Samad Samana noted.
“Our math suggests that the AI Add-On could add ~2 pts to the Enterprise rev growth rate and ~1 pt to the total rev growth rate,” they added.
Zoom is also expected to enhance its platform’s stickiness and reduce churn by embedding its AI products into enterprise workflows. The AI Companion 2.0 is designed to interact not only within Zoom’s environment but also with other applications like Microsoft (NASDAQ:MSFT), Google (NASDAQ:GOOGL), and various third-party apps, potentially transforming Zoom from a communication tool to an essential enterprise system.
Jefferies also notes that management has set reasonable expectations for fiscal year 2026, with the anticipated fourth-quarter fiscal year 2025 exit growth rate serving as a good indicator. Additionally, Zoom’s average monthly churn rate has reached multi-year lows, suggesting the possibility of better-than-expected online revenue growth.
“We see potential for this shift to improve both growth and retention, while also helping allay competitive disruption concerns,” analysts added.
Regarding the company’s financial position, Jefferies points out that Zoom’s net cash balance of $7.7 billion offers flexibility for further stock buybacks, as evidenced by an additional $2 billion authorization during the third-quarter fiscal year 2025 earnings report, and potential for strategic mergers and acquisitions.
On valuation, analysts believe that Zoom stock is trading at a discount, presenting an opportunity for the stock to re-rate positively as the company addresses long-term strategic and competitive concerns.