Analysts Divided On Zoom's Future: Solid Performance Marred By Growth Concerns

Shares of Zoom Video Communications Inc ZM tanked in early trading on Tuesday, despite the company reporting upbeat revenues and earnings for its first quarter.

The report came amid an exciting earnings season. Here are some key analyst takeaways from the earnings release.

Morgan Stanley On Zoom Video Communications

Analyst Meta Marshall maintained an Equal-Weight rating and price target of $78.

“ZM reported upside to FQ1, largely as the online business outperformed and operating margin was meaningfully better than expected,” Marshall wrote in a note.

Although Zoom is among the most profitable companies within software, “growth prospects and SBC expense have been ongoing overhangs,” the analyst said. “Getting past the biggest Enterprise renewal quarter with a top-line beat and a positive outlook, even if driven by the Online business, was a step towards diminishing one of the key risks of the business,” the analyst added.

Oppenheimer On Zoom Video Communications

Analyst George Iwanyc reiterated a Perform rating on the stock.

Zoom’s Online business “started to show signs of stabilization faster than expected,” Iwanyc said. However, recent layoffs and sales force realignment are “compounding macro pressure on Enterprise revenue growth.”

The analyst expects the pressure on Zoom's Enterprise growth to increase, “before potential stabilization later in FY24-25.”

Check out other analyst stock ratings.

RBC Capital Markets On Zoom Video Communications

Analyst Rishi Jaluria reaffirmed an Outperform rating and price target of $95.

Zoom’s quarterly results were “solid,” with growth in the Online business offsetting Enterprise weakness, Jaluria said in a note.

“While we're encouraged by Online stabilizing ahead of schedule, we would prefer to see more resiliency out of the Enterprise business, where the FY24 growth outlook was revised down to just 6% (vs. low-double-digits prior), which management attributed to temporary disruption from the RIF/restructuring,” the analyst added.

William Blair On Zoom Video Communications

Analyst Matt Stotler maintained an Outperform rating on the stock.

“Despite continued higher deal scrutiny and foreign exchange-related headwinds as a result of current macroeconomic dynamics having a pronounced effect on revenue from international markets, management has continued to execute well on factors that are in their control,” Stotler said.

“We continue to view Zoom’s strategic shift toward a platform focus positively and believe the company’s emphasis on optimizing go-to-market functions and maintaining a strong balance sheet should help the company outlast any near-term uncertainty while providing capacity to ramp investments when the macro environment turns more favorable,” he added.

Bernstein On Zoom Video Communications

Analyst Peter Weed reiterated a Market Perform rating and price target of $92.

“The company guided to an effectively -2% QoQ top line growth,” Weed wrote in a note.

Management said that the Online business would remain almost flat, “implying the enterprise business is expected to contract >3% QoQ in Q2,” the analyst stated. Adding that this was due to the company's restructuring in the first quarter and “given deal linearity means the effects largely show up in Q2.”

ZM Price Action: Shares of Zoom Video Communications were down 7.74% to $65.89 at the time of publishing Tuesday, according to Benzinga Pro.