Zoom's Rating Upgraded Amid Strong Growth Prospects
Written by Emily J. Thompson, Senior Investment Analyst
Updated: May 16 2024
0mins
Should l Buy ZM?
Source: Coinmarketcap
Zoom Communications Inc. saw its stock price decline by 5.03% as it crossed below the 5-day SMA, reflecting a challenging trading session.
The stock's movement comes amid Wolfe Research upgrading Zoom's rating from peer perform to outperform, with a new price target of $115. The analyst highlighted growth drivers such as the strength in Zoom Contact Center and sustained growth in Zoom Phone, alongside emerging monetization from Voice AI. This indicates a positive outlook for the company's future growth, which is not yet fully reflected in market expectations.
The implications of this upgrade suggest that despite the current price drop, there is significant potential for recovery as market confidence builds around Zoom's financial position and growth strategies.
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Analyst Views on ZM
Wall Street analysts forecast ZM stock price to rise
20 Analyst Rating
12 Buy
7 Hold
1 Sell
Moderate Buy
Current: 88.650
Low
85.00
Averages
99.33
High
115.00
Current: 88.650
Low
85.00
Averages
99.33
High
115.00
About ZM
Zoom Communications, Inc. provides an artificial intelligence (AI) work platform for human connection. Zoom Workplace, the Company’s AI-powered, open collaboration platform built for modern work, enables us to streamline communications, increase employee engagement, optimize in-person time, improve productivity, and offer customer choice with third-party apps and integrations. Zoom Workplace, powered by Zoom AI Companion, includes collaboration solutions like meetings, team chat, phone, scheduler, whiteboard, spaces, Workvivo, and more. Its communication products include Zoom Meetings, Zoom Phone, Zoom Team Chat, Zoom scheduler, and Zoom mail and calendar. Its productivity products include Zoom Docs, Zoom Whiteboard, Zoom Clips, and Zoom Tasks. Its space products include Zoom Rooms, Zoom Workspace Reservation, and Zoom Visitor Management. It serves various industries, including education, financial services, government, retail, manufacturing and healthcare.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
BTIG Analyst Outlook on Zoom and Others Ahead of Earnings
- Zoom AI Strategy: Analysts noted that Zoom's partner for Custom AI Companion and Contact Center is ahead of schedule, with FY27 CC total revenue expected to reach at least $5.05 billion, a 3.7% year-over-year increase, surpassing the market consensus of $5.03 billion, indicating the company's proactive stance in the AI sector.
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- Stagnant Revenue: The company's revenue for 2023 was $2.6 billion, projected to fall by 1% to $2.5 billion in 2024, with a 3% year-over-year decline in Q1 2025, indicating a lack of growth momentum in a highly competitive market.
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- Palantir's Positive Outlook: Palantir's fourth-quarter results exceeded expectations, and the company provided first-quarter sales guidance above estimates, along with FY26 guidance that also surpassed analyst forecasts, highlighting its future growth potential.
- Kinsale Capital's Optimistic Forecast: Kinsale Capital shares rose 0.4% to close at $410.44 on Thursday, with analyst Hristian Getsov initiating coverage with an Overweight rating and a $490 price target, reflecting market confidence in its future performance.
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Zoom Communications Stock Poised for Rally
- Rating Upgrade: Wolfe Research upgraded Zoom's rating from peer perform to outperform, with analyst Alex Zukin setting a new price target of $115, indicating a potential 27% rally in Zoom's stock, reflecting growing market confidence in its future growth prospects.
- Growth Drivers: Strength in Zoom Contact Center and sustained mid-teens growth in Zoom Phone, along with emerging monetization from Voice AI, are driving improving growth durability, which the analyst believes is not yet fully reflected in market expectations.
- Strong Financial Position: Zoom holds approximately $8 billion in net cash and is expected to add another $3.9 billion over the next two years, providing ample financial resources for growth-accretive M&A in adjacent areas like Voice AI and Contact Center software.
- Attractive Valuation: Currently trading at less than 10 times its free cash flow for the 2027 fiscal year, Zoom offers a significant discount compared to other non-security, cash-generative software peers, presenting a favorable risk/reward opportunity for investors.
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- Zoom AI Strategy: Analysts noted that Zoom's partner for Custom AI Companion and Contact Center is ahead of schedule, with FY27 CC total revenue expected to reach at least $5.05 billion, a 3.7% year-over-year increase, surpassing the market consensus of $5.03 billion, indicating the company's proactive stance in the AI sector.
- Salesforce Challenges: While Agentforce shows “incremental traction,” the consumption-based pricing model remains a significant hurdle for enterprises, leading analysts to lower Salesforce's price target from $335 to $260, reflecting concerns over its core business.
- Workday Leadership Change: The return of Aneel Bhusri as CEO is viewed positively, with FY27 subscription revenue growth guidance expected at 13%, highlighting the company's potential in AI investments, and analysts express optimism regarding its GARP valuation.
- Docusign Positive Outlook: Analysts believe Docusign will achieve strong billing growth in Q4, with FY27 subscription revenue projected to exceed consensus at $3.35 billion, a 6.6% year-over-year increase, although the price target is lowered to $70 due to peer multiple contraction.
See More
Market Risks Intensify as Tech Stocks Continue to Decline
- Tech Stock Underperformance: The Nasdaq dropped 2.10% last week, while the S&P 500 and Dow Jones fell by 1.39% and 1.23%, respectively, indicating growing concerns over tech stocks that could lead to decreased investor confidence.
- Mixed Employment Data: The January 2026 nonfarm payrolls rose by 130,000, surpassing expectations of 55,000; however, revisions for 2025 revealed only 181,000 jobs were created, highlighting labor market weaknesses that may influence Federal Reserve policy decisions.
- Market Correction Dynamics: The Nasdaq has been undergoing a time-based correction since late October, with an 8-9% pullback in November, yet remains range-bound, reflecting market hesitation and uncertainty that could set the stage for future gains.
- Increasing Risk Signals: A growing list of market risk signals, particularly the declining ratio of stocks to bonds, suggests a waning investor appetite for risk assets, potentially leading to further deterioration in market sentiment.
See More
Teladoc Health's Stock Price Continues to Decline
- Stock Price Plunge: Teladoc Health's stock price plummeted from $263 in January 2021 to $21 by the end of 2023, marking a staggering 92% decline, which reflects a sharp decrease in market demand post-pandemic and a lack of investor confidence.
- Stagnant Revenue: The company's revenue for 2023 was $2.6 billion, projected to fall by 1% to $2.5 billion in 2024, with a 3% year-over-year decline in Q1 2025, indicating a lack of growth momentum in a highly competitive market.
- Intensifying Competition: With doctor's offices reopening, 71% of patients prefer in-person visits, putting Teladoc under pressure from both traditional healthcare services and other telemedicine platforms, further squeezing its market share.
- Lack of Profitability: Despite a negative net profit margin of 21% during the pandemic peak in 2021, Teladoc has yet to achieve profitability, currently at negative 8.8%, indicating that the company struggles to reverse its fortunes amid declining revenues.
See More
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- Zoom's Strong Earnings: Zoom reported third-quarter revenue of $1.23 billion on November 24, surpassing the consensus estimate of $1.21 billion, indicating robust cash flow and market demand that could drive stock price growth.
- Palantir's Positive Outlook: Palantir's fourth-quarter results exceeded expectations, and the company provided first-quarter sales guidance above estimates, along with FY26 guidance that also surpassed analyst forecasts, highlighting its future growth potential.
- Kinsale Capital's Optimistic Forecast: Kinsale Capital shares rose 0.4% to close at $410.44 on Thursday, with analyst Hristian Getsov initiating coverage with an Overweight rating and a $490 price target, reflecting market confidence in its future performance.
- Merck's Drug Approval: Merck's ENFLONSIA received approval from Health Canada for preventing RSV lower respiratory tract disease in newborns and infants, with shares gaining 1.2% to close at $119.75, showcasing the company's ongoing innovation in the healthcare sector.
See More
Zoom Communications Stock Poised for Rally
- Rating Upgrade: Wolfe Research upgraded Zoom's rating from peer perform to outperform, with analyst Alex Zukin setting a new price target of $115, indicating a potential 27% rally in Zoom's stock, reflecting growing market confidence in its future growth prospects.
- Growth Drivers: Strength in Zoom Contact Center and sustained mid-teens growth in Zoom Phone, along with emerging monetization from Voice AI, are driving improving growth durability, which the analyst believes is not yet fully reflected in market expectations.
- Strong Financial Position: Zoom holds approximately $8 billion in net cash and is expected to add another $3.9 billion over the next two years, providing ample financial resources for growth-accretive M&A in adjacent areas like Voice AI and Contact Center software.
- Attractive Valuation: Currently trading at less than 10 times its free cash flow for the 2027 fiscal year, Zoom offers a significant discount compared to other non-security, cash-generative software peers, presenting a favorable risk/reward opportunity for investors.
See More
Latest Wall Street Rating Updates
- Goldman Sachs Reiterates Nvidia: Goldman Sachs maintains a Buy rating on Nvidia ahead of its earnings report, expecting investors to focus on visibility into 2027, non-traditional customer demand, and trends in the Chinese market, indicating strong market confidence in Nvidia's future growth.
- Benchmark Initiates Cava Rating: Benchmark initiates coverage of CAVA Group with a Buy rating and an $80 price target, reflecting its leadership position in the rapidly emerging Mediterranean dining market, which is expected to attract more investor interest in this burgeoning sector.
- BMO Capital Upgrades Brookfield: BMO upgrades Brookfield Asset Management from Market Perform to Outperform, citing attractive mid-teens distributable earnings growth prospects underpinned by continued fundraising momentum and fee rate resilience, showcasing the company's robust financial health.
- Bank of America Downgrades Qualcomm: Bank of America downgrades Qualcomm from Buy to Neutral, lowering the price target from $215 to $155 due to concerns over cyclical and structural weaknesses in the handset market, which may adversely affect its future performance.
See More
