Rosenblatt Securities has revised its price target for Zoom Communications (ZM, Financial), lowering it from $95 to $90 while maintaining a Buy rating on the stock. This adjustment reflects caution amidst ongoing macroeconomic challenges and potential tariff impacts that could affect Zoom's revenue growth prospects, particularly in international markets.
The firm has also adjusted its revenue forecasts for fiscal years 2026 and 2027. The reduced projections take into account the current economic uncertainty and external factors that may hinder Zoom's expansion efforts outside the United States.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 26 analysts, the average target price for Zoom Communications Inc (ZM, Financial) is $89.25 with a high estimate of $115.00 and a low estimate of $65.00. The average target implies an upside of 22.54% from the current price of $72.83. More detailed estimate data can be found on the Zoom Communications Inc (ZM) Forecast page.
Based on the consensus recommendation from 34 brokerage firms, Zoom Communications Inc's (ZM, Financial) average brokerage recommendation is currently 2.6, indicating "Hold" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Zoom Communications Inc (ZM, Financial) in one year is $74.27, suggesting a upside of 1.98% from the current price of $72.83. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Zoom Communications Inc (ZM) Summary page.
ZM Key Business Developments
Release Date: February 24, 2025
- Total Revenue: $1.184 billion, a 3% year-over-year increase.
- Enterprise Revenue: Grew 6% year over year, comprising 60% of total revenue.
- Average Monthly Churn: 2.8%, a 20-basis-point improvement year over year.
- Non-GAAP Gross Margin: 78.8%, slightly lower due to strategic investments in AI.
- Non-GAAP Income from Operations: $468 million, a 5% year-over-year increase.
- Non-GAAP Operating Margin: 39.5%, an improvement of 81 basis points from last year.
- Non-GAAP Diluted Net Income per Share: $1.41, $0.11 above guidance.
- Deferred Revenue: $1.35 billion, a 7% year-over-year increase.
- Operating Cash Flow: $425 million, a 21% year-over-year increase.
- Free Cash Flow: $416 million, a 25% year-over-year increase.
- Cash and Marketable Securities: Approximately $7.8 billion.
- Share Buyback: 4.3 million shares purchased for $355 million in Q4.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Zoom Communications Inc (ZM, Financial) reported a 3% year-over-year revenue growth in Q4, surpassing their top-line guidance.
- The company saw a significant increase in the adoption of its AI capabilities, with Zoom AI Companion's monthly active users growing by 68% quarter over quarter.
- Zoom's enterprise revenue grew by 6% year over year, now constituting 60% of total revenue, indicating strong enterprise traction.
- The Contact Center achieved its largest ARR deal in history with a Fortune 100 US tech company, showcasing its ability to win large enterprise customers.
- Zoom's strategic partnerships, such as with Mitel and Amazon, are expanding its market reach and enhancing its platform's appeal.
Negative Points
- Despite revenue growth, the overall growth rate remains modest at 3%, with guidance for FY26 indicating only a slight increase.
- The company faces ongoing macroeconomic challenges and uncertainties, which could impact future growth.
- Zoom's online business continues to experience churn, although it has improved to a record low of 2.8% in Q4.
- The transition to AI-first initiatives involves significant investment, which may impact margins in the short term.
- There is a potential risk of increased competition in the AI space, as many vendors are pitching their AI capabilities to customers.
