LegalZoom Gets Double Upgrade On 'Incrementally Positive' Business Formations Data

LegalZoom.com Inc LZ could benefit from the positive inflection in business formations in November and December 2024, according to JPMorgan.

The LegalZoom.com Analyst: Analyst Ella Smith upgraded the rating for LegalZoom.com from Underweight to Overweight, while raising the price target from $8 to $9.

The LegalZoom.com Thesis: While there were steep declines business formations data through most of 2024, the data for the last two months of the year "seems to indicate the trend is reversing," Smith said in the upgrade note.

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The two months of "incrementally positive data" suggests low single digit growth in overall business formations in 2025 and 2026, she added.

LegalZoom.com is likely to guide the midpoint of its adjusted EBITDA range for 2025E "at least 5% above the Street's estimate," the analyst stated.

"Management has said the company would actualize $10M of cost savings due to a reduction in force in 2024E, and $25M of savings in 2025E," Smith wrote. The 2025 adjusted EBITDA guidance could be around $15 million higher than 2024, she further said.

Price Action: Shares of LegalZoom.com had risen by 5.72% to $7.95 at the time of publication on Monday.

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