Zoom Beats Estimates, But Could Have Rough Year: What 8 Analysts Have To Say

Quarterly revenue and earnings per share from Zoom Video Communications ZM came in better than anticipated from analysts. Here are the key takeaways from analysts on what’s next for the video technology company.

The Zoom Analysts: Bank of America analyst Michael Funk has a Neutral rating and lowered the price target from $200 to $162.

Morgan Stanley analyst Meta Marshall has an Overweight rating and a $140 price target.

JMP Securities analyst Patrick Walravens has a Market Perform rating and no price target.

RBC Capital analyst Rishi Jaluria has an Outperform rating and a $200 price target.

Wells Fargo analyst Michael Turrin has an Equal Weight rating and a $105 price target.

Mizuho Securities analyst Siti Panigrahi has a Buy rating and a $190 price target.

Needham analyst Ryan Koontz has a Hold rating and no price target.

Related Link: Why Zoom Video Shares Are Surging After Hours 

The Analyst Takeaways: Funk calls Zoom a “back half story,” but sees COVID-19 pandemic-related hurdles going forward.

“We believe the improvement could be uneven as the COVID-19 reopening headwinds and return to work pressures potentially apply greater than projected pressure on historic churn trends,” Funk said.

Marshall points to a return to work survey done by Morgan Stanley that shows the Zoom story remains strong.

“Zoom specifically is doing well in holding share, even in Teams accounts, and the business model remains very attractive,” Marshall said.

Marshall sees the current price of Zoom shares as an attractive entry point.

“We continue to find Zoom a name where investors need to search hard for a reason to not own it.”

Walravens points to results and guidance coming in better than expected from Zoom in the quarter.

“Zoom is effectively cross-selling Zoom Phone and Zoom Chat into its extensive customer base and should see success with new products, like Zoom IQ for Sales, Zoom Whiteboard, and Zoom Contact Center,” Walravens said.

The analyst does see competition coming from Microsoft Corporation MSFT as a challenge and suggests a potential combination of Zoom with Salesforce.com CRM as a way to take on the competition.

Zoom is a long term play according to Jaluria with valuation and limited downside seen in shares.

“It may take additional quarters of solid execution before investors are comfortable returning to Zoom,” Jaluria said.

The analyst points to the company potentially helping address long term concerns and questions at its Zootopia event in August or September.

Zoom reported results that were “better than feared,” Turrin added.

The analyst questions what’s next for the company.

“The more important question revolves around the company’s next leg of growth and if/when newer products show up more meaningfully, helping reinforce growth and inform the company’s longer-term margin trajectory,” Turrin said.

Panigrahi sees fiscal year 2023 as a transitional year for Zoom and points to new products providing growth opportunities in the future.

“Although ZM shares may remain range-bound in the near-term, we believe the current valuation of 5x EV/NTM revenue offers a better risk/reward,” Panigrahi said.

Meanwhile, the Needham analyst highlights the acquisition of Solvvy by Zoom that was announced last week. The analyst sees Solvvy helping Zoom compete in the call center space with a pricing model that could be attractive to take on names in the sector.

“We remain fairly cautious on meaningful re-acceleration until product diversification improves. Phone, Rooms or Events achieving 10% of total revenue would mark important developments,” Koontz said.

Price Action: Zoom shares were up 6% to $94.34 on Tuesday, according to Benzinga Pro.