Zoom Video Communications has earned a repeat ‘Neutral’ rating and $80 price target from Wedbush Securities analysts after the communications company reported strong quarterly results, with both revenues and margins coming ahead of the Street expectations and guide.
“Our price target of $80 is based on 14x FY25E EV/FCF, which we believe is in line with growth-adjusted peer multiples,” the analysts wrote in a note to clients.
Zoom shares were trading down 4.5% at US$71.25 in the early afternoon on Wednesday.
READ: Zoom surpasses expectations for its fiscal 4Q thanks to Enterprise customers
The analysts noted that, as expected, Enterprise drove the momentum in the quarter with Online revenues continuing to decline year-over-year.
“Zoom indicated that it expects the majority of its growth to come from existing customers and upsell, and it is seeing good traction in upselling suites such as Zoom One to its installed base,” the analysts wrote.
“Although early, Zoom reported good traction in its Zoom One suite which combines its Zoom Meeting, Zoom Phone, Chat, and Whiteboard products.”
They highlighted that the guide for 1Q24 and FY24E revenues were below the Street’s expectations, but its operating income guide was ahead.
“Zoom expects the Online revenues to continue declining year-over-year, but expects them to stabilize in 2HF24,” they wrote.
Wedbush’s analysts questioned how conservative Zoom’s guide is, noting “the revenue guide is fairly conservative since it seems to imply Enterprise revenue growth slowing quite a bit and Online, again, down about 8% to 9%.”
They concluded that “the guide seems ok, but is contingent on the Enterprise momentum remaining stable in FY24, and assuming no decline in ‘new business’ in FY24.”
Contact the author at emily.jarvie@proactiveinvestors.com
Find her on Twitter @emilyjjarvie