Zoom's Growth Stalls In 'More Challenging Macro Environment': What 5 Analysts Say Comes Next After Q4 Earnings

Technology company Zoom Video Communications ZM reported fourth-quarter financial results that came in ahead of Street estimates Monday after the market close. The company also issued first-quarter and full year guidance. Here’s a look at what analysts are saying after the print. 

The Zoom Analysts: Morgan Stanley analyst Meta Marshall has an Equal Weight rating and $78 price target.

Oppenheimer analyst George Iwanyc has a Perform rating.

Needham analyst Ryan Koontz has a Hold rating.

Bernstein analyst Peter Weed has a Market Perform rating and raised the price target from $88 to $92.

KeyBanc analyst Thomas Blakey has a Sector Weight rating and no price target.

Related Link: Did You Know Zoom Video Has Beat Earnings Every Quarter Since Its IPO? 

The Zoom Takeaways: Marshall said Zoom's fourth-quarter results showed outperformance vs. the bearish sentiment on the company.

“Perhaps most importantly, as previewed, investors had leaned too bearish into the print, so even as company reduced top line outlook, it was less than investors expected,” Marshall said.

The guidance from the company shows some growth for fiscal 2024 and operating margins with flexibility for the company during a “more challenging macro environment,” the analyst said. 

Iwanyc said the earnings per share in the fourth quarter were much stronger than expected with the company focusing on spending priorities.

“Positively, more savings are ahead, including Zoom’s recent 15% headcount cut,” the analyst said. 

The demand for Zoom remains challenging, with slowing Enterprise expansion and online pressure, he said. 

“We’re positive on the operational adjustments and expect the shares to react positively near-term, though we maintain our Perform rating looking for better visibility into demand stabilization/improvement.”

Koontz said Zoom’s growth is stalled, with the online business stabilizing and enterprise business expected to decelerate in the future.

The analyst said the Zoom Phone business segment had a “strong quarter” with 100% growth year-over-year.

“With top-line growth stalled, we remain cautious on meaningful re-acceleration until product diversification improves,” Koontz said.

“Management expects Phone to contribute 10%+ of revenue by early 2024, and we believe an addition product such as Rooms, Events, or Contact center achieving 10% would mark important developments.”

Weed said Zoom showed “lean growth, fat profits” in the fourth quarter, as well as cost improvements. 

“Perhaps the focus on margins isn’t surprising, with a tepid 1% YoY guide for FY24 revenue growth,” the analyst said. 

Fiscal year 2024 revenue guidance could be conservative if the online business stops falling in the second half with raised prices and new customers, he said. 

Blakey sees macro pressure on Zoom’s enterprise business offsetting higher margins in fiscal 2024.

“We believe Zoom remains well positioned to benefit from secular hybrid work and related digital collaboration trends but remain SW given continued declines in Online and possible sustaining pricing pressures in Enterprise.” 

ZM Price Action: Zoom shares are up 2.93% to $75.99 on Tuesday versus a 52-week trading range of $63.55 to $136.

Read Next: Trading Strategies For Zoom Communication Stock After Q4 Earnings 

Photo courtesy of Zoom.