Is Zoom Poised To Re-Accelerate Growth? 6 Analysts With Different Takes On FQ3 Results, Prospects

Shares of Zoom Video Communications Inc ZM continued to slide in early trading on Tuesday, despite the company reporting upbeat fiscal third-quarter results.

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

Mizuho Securities On Zoom Video Communications

Analyst Siti Panigrahi maintained a Buy rating and price target of $100.

Zoom Video Communications reported its fiscal third-quarter revenue and operating profit significantly higher than the consensus estimates, Panigrahi said in the note. “The revenue beat was driven by better than expected Enterprise revenues (7.5% Y/Y vs. consensus of 5.4% Y/Y),” he added.

“Additionally, we believe that FQ4 guidance appears conservative as ZM is well-positioned to re-accelerate growth by cross-selling Zoom Phone and Zoom Contact Center into its large installed base of customers,” the analyst further stated.

Benchmark On Zoom Video Communications

Analyst Matthew Harrigan reiterated a Buy rating and price target of $83.

The “marginal gains” Zoom records in fiscal 2024 “are less important than more visibility for intermediate revenue reacceleration off AI Companion, Zoom Phone, Zoom Contact Center and Zoom Virtual Agent.” Harrigan wrote in a note.

“Next year’s Zoom Docs debut will enhance Zoom’s positioning on the 'work suite' map to complement its positioning in video conferencing, telephony, chat and email with further advances from investments in generative AI, Workforce Management apps and contact center tools,” he added.

Goldman Sachs On Zoom Video Communications

Analyst Kash Rangan reaffirmed a Neutral rating and price target of $70.

Zoom Video Communications delivered “decent” quarterly results, with revenues, operating margins and free cash flows above Street expectations, Rangan said in a note.

“We attribute the slightly better-than-expected F3Q revenue performance to steady Enterprise segment execution against low expectations, benefiting from Zoom Phone momentum and adoption of the Zoom One platform bundle, along with sequential stability to Online revenue (monthly churn at historical 3% low),” he added.

Check out other analyst stock ratings.

Needham On Zoom Video Communications

Analyst Ryan Koontz reiterated a Hold rating on the stock.

“F3Q international sales were challenged, declining y/y for the 6th consecutive Q, and global enterprise stalled to 0% q/q growth,” Koontz wrote in a note.

“With top-line growth stalled, we are cautious on meaningful re-acceleration until product diversification improves,” the analyst stated. “Given the macro and saturation of Teams in the enterprise, we look to new products such as Rooms, Contact Center, Workvivo, new AI applications or an acquired product to make strong progress before getting more constructive on the stock,” he added.

Oppenheimer On Zoom Video Communications

Analyst George Iwanyc maintained a Perform rating on the stock.

The company’s results showed “tight operating discipline and strong cash flow,” Iwanyc said. “However, macro challenges continue to weigh on seat expansion/spending,” he added.

“Zoom One bundling and Phones adoption is offsetting some pressure, but visibility into stronger growth remains limited,” the analyst further stated.

KeyBanc Capital Markets On Zoom Video Communications

Analyst Thomas Blakey reaffirmed a Sector Weight rating on the stock.

Zoom’s earnings beat was driven by “lower G&A (bad debt expense, legal fees) and higher interest income,” Blakey said.

“Enterprise down ticked, in our view, despite Zoom moving past the majority of (50%+) renewals exiting FY24,” the analyst wrote. “The macro seems to be weighing on Enterprise, as evidenced by a 65% decline y/y in $100K+ net adds, 105% dollar-based net expansion rate vs. 109% in F2Q24 and 117% a year ago F3Q23, elongating contract durations, and a very back-end-loaded quarter,” he added.

ZM Price Action: Shares of Zoom Video Communications were down 1.9% to $64.70 at the time of publication Tuesday.

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