On Friday, Scotiabank (TSX:BNS) analyst Allan Verkhovski increased the price target on Zoom Video Communications Inc. (NASDAQ:ZM) to $85 from $75, while keeping a Sector Perform rating on the stock. With a current market capitalization of $25.57 billion and an impressive "GREAT" financial health score from InvestingPro, Zoom continues to demonstrate strong fundamentals. Verkhovski highlighted Zoom’s recent developments, including a new AI-first hybrid solution with Mitel, an expanded Zoom Workplace for Frontline (NYSE:FRO), and the introduction of agentic AI Companion capabilities. These advancements have begun to reposition Zoom as a more comprehensive productivity platform.
Zoom’s stock has seen a rise, with a 3% increase compared to the broader software industry index (IGV), which gained 5% following Zoom’s fourth-quarter earnings report. Trading at $83.85, the stock maintains strong fundamentals with a P/E ratio of 25.49 and an impressive gross profit margin of 75.79%. During the follow-up call for the quarter, Zoom’s management pointed out several potential positive factors for the fiscal year 2026, such as an expected improvement in net revenue retention (NRR), more stringent discounting practices, and growing momentum in their Contact Center product, which is believed to be reaching a pivotal moment.
The analyst’s conversation with Zoom’s management before the quiet period revealed a stronger conviction in the ongoing momentum of the Contact Center and Zoom’s ability to command higher prices. Notably, monthly paying Pro customers have not experienced a price hike in over two years. Verkhovski suggests that Zoom is in a solid position to outperform key financial metrics and to potentially provide guidance that surpasses consensus expectations.
While the Sector Perform rating remains unchanged, Verkhovski’s outlook leans positive in anticipation of Zoom’s first-quarter earnings report scheduled for May 21, 2025. The revised price target of $85 is based on an 11x multiple of Zoom’s calendar year 2026 enterprise value to free cash flow (EV/FCF).
In other recent news, Zoom Communications has introduced a suite of advanced AI capabilities across its platform, aiming to enhance productivity and collaboration. The new features include the AI Companion, which will assist users by performing tasks and managing complex processes, with specialized agents for business services like Zoom Virtual Agent. Zoom also plans to offer a Custom AI Companion add-on for organizations to tailor AI functionalities to their specific needs. In a separate development, Zoom announced an integration with ServiceNow (NYSE:NOW) to streamline customer service and IT support through a unified platform, enhancing customer experience with AI-driven tools.
Additionally, Zoom Communications has agreed to implement corporate governance reforms as part of a settlement in a stockholder derivative action, subject to final court approval. The company will pay legal fees without admitting any wrongdoing. In executive news, Zoom’s CFO, Michelle Chang, will temporarily assume the role of principal accounting officer following the resignation of Shane Crehan, the Chief Accounting Officer. Piper Sandler has adjusted its price target for Zoom, reducing it from $89 to $77, while maintaining a Neutral rating, citing factors such as foreign exchange changes and potential demand pressures.
These developments reflect Zoom’s ongoing efforts to adapt to market dynamics and enhance its operational capabilities.
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