Zoom Technologies Inc (NASDAQ:ZOOM)'s revenue guidance for the upcoming financial year is at risk as the video conferencing software company’s enterprise bookings continue to slow down, analysts at Wedbush believe.
“When we analyze what enterprise revenue growth could look like based on billings growth this year, we end up with an estimate of low-single digits and hence total revenue growth for the 2025 financial year could also be in the 3% range,” they wrote in a note to clients following the release of Zoom’s third quarter fiscal 2024 financial results after Monday’s closing bell.
They wrote that assuming that Zoom guides with a buffer of about $20 million per quarter, they expect the initial revenue guide for the 2025 financial year which will start in February 2024, to be $4.586 billion compared to Street expectations of $4.65 billion.
“We believe this presents a slight risk to 2025 financial year revenue guide,” the analysts wrote.
In terms of free cash flow for 2025, the analysts noted that Zoom had increased its 2024 free cash flow expectations given strong margin performance and collections.
“However, for the 2025 financial year, most of the tailwinds that helped free cash flow might not repeat, including margin improvement, and with duration and billings under pressure, cash flows will likely be under pressure too,” the Wedbush analysts wrote.
“Hence, for the 2025 financial year, free cash flow growth is likely to be in line to slightly above revenue growth which would mean about 3% to 4%. Assuming a slight beat versus the guidance if 2024 free cash flow ends up at $1.37 billion, 2025 free cash flow is likely to be $1.41 billion to $1.425 billion.”
The analysts awarded Zoom a ‘Neutral’ rating and a price target of US$80.
Zoom shares traded flat at about US$66 shortly before noon on Tuesday.
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