Zoom Analyst Sees 'Minimal' Near-Term Upside Ahead Of Q1 Report

Zoom Video Communications Inc ZM has zoomed past levels that could render the valuation attractive, leaving scope for "minimal" near-term upside, an analyst at Rosenblatt Securities said ahead of the company's Tuesday first-quarter report. 

The Zoom Analyst

Ryan Koontz maintained a Neutral rating and upped the price target from $95 to $150.

The Zoom Thesis

Zoom is likely to report very strong revenues but in-line earnings results due to higher opex and "freemium" products costs, Koontz said in a Friday note. (See his track record here.)

Rosenblatt expects the company to raise its second-quarter and second-half revenue guidance, the analyst said. 

The coronavirus pandemic has transformed Zoom's "laser-focused business tool" into an everyday consumer brand and a vital business tool in the work-from-home era, he said. 

The wide adoption of video collaboration by businesses around the world should drive upside to consensus estimates for fiscal year 2021, Koontz said.

With the company decisively responding to security concerns that arose in March and addressing training and technical shortcomings, the near-term business adoption and brand are only slightly impacted, the analyst said. 

Zoom does face an increasing competitive threat in enterprise in fiscal year 2022 and beyond, particularly if it doesn't improve its enterprise-class features and channel, he said. 

Rosenblatt raised its fiscal 2021 and 2022 revenue estimates modestly, with minimal changes to earnings estimates.

"Given the stock's meteoric rise (+ 138% vs S&P -7% YTD), we believe buy-side expectations are sky-high and see minimal nearterm stock upside," Koontz said. 

ZM Price Action

At last check, Zoom shares were rallying 14.54% to $205.58. 

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Photo courtesy of Zoom.