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Zoom Video Jumps as BofA Makes It a Top Pick After Five9 Buy

A combined Zoom Video/Five9 would be the strongest player in the market, according to Bank of America analysts.
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Shares of Zoom Video Communications  (ZM) - Get Zoom Video Communications (ZM) Report jumped Monday after analysts at Bank of America named the stock a top pick following its deal to buy Five9

Bank of America has a buy rating and $480 price target on the company. 

“Together, Zoom/Five9 would be the strongest UCaaS/CCaaS (unified communications as a service/contact center as a service)  combination in the market,” said analyst Daniel Bartus. 

"While it is early for enterprises to consider UCaaS and CCaaS together, we believe the trend of bundling is increasing and the long-term value of integrating both technologies is attractive," Bartus said.

Zoom Video shares were up 3.8% to $372.95 Monday afternoon on the news at last check. 

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The deal represents a competitive risk for company's like RingCentral and 8x8  (EGHT) - Get 8x8 Inc. Report, Bartus said. RingCentral  (RNG) - Get RingCentral, Inc. Class A Report shares were falling 1.8% to $271.55 per share at last check.

RingCentral “still has several ways to differentiate and compete well vs Zoom," Bartus said, but 8x8 may have a tougher time competing. 

Zoom announced the purchase of Five9 for just under $15 billion last week.

Investors in San Ramon, California-based Five9 will get 0.55 of a Zoom share for each of their holdings, implying a price of $200.28 each - a 12.8% premium to their Friday closing price and a 23 times multiple to Five9's projected 2022 sales of $650 million.

The purchase expands Zoom's total addressable market, including individual and enterprise customers, by around $24 billion, according to both the companies and analysts. CEO Rowan Trollope will continue to run the group, which will be folded into Zoom's broader operations, and take on the title of company president.