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Zoom Video Stock Targets Slashed on Revenue- Slowdown Warning

Analysts are cutting their price targets on Zoom Video Communications following a warning of a revenue slowdown.

Zoom Video Communications  (ZM) - Get Zoom Video Communications, Inc. Class A Report analysts slashed their share-price targets Tuesday after the videoconferencing company posted better-than-expected quarterly earnings but warned of a revenue slowdown as the Covid-19 pandemic wanes.

Shares of the San Jose, Calif., company at last check were off 18% at $198.

Zoom reported net income of $340.3 million, or $1.11 a share, vs. $198.4 million, or 66 cents a share, in the year-earlier period. Analysts polled by FactSet had been expecting per-share earnings of $1.05 a share.

Bank of America analyst Brad Sills downgraded the company to neutral from buy with a price target of $270, down from $385, according to the Fly.

Sills said the results and outlook suggest that reopening headwinds continue to weigh on growth and "record low" quarter-over-quarter enterprise and online customer metrics suggest churn -- movement of users to rival services -- continues to weigh on customer count, 

A broader slowdown in both new-customer growth and expansion activity, along with still heightened online churn give little certainty as to the bottom for growth, the analyst added.

Stifel analyst J. Parker Lane lowered his price target on Zoom Video to $275 from $300, while keeping a hold rating, even as he noted that the company's results "beat expectations across all key metrics." 

Lane said the company was well positioned to expand its current customer relationships and mature into more than just a meetings platform.

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He added that multiple new products - including Video Engagement Center, Zoom Chat, Zoom Apps, and Zoom Events - can help offset some of the Meetings volume decline that has taken place as employees return to offices.

Deutsche Bank analyst Matthew Nikam lowered his price target on Zoom Video to $280 from $350, while keeping a hold rating on the shares.

While positive on Zoom's strategic initiatives and investments in key growth areas, Nikam said he found it "tougher to like a stock with more sharply decelerating growth and incremental pressure on profitability." 

The analyst said he thought the results did little to change the narrative on either side, with bulls likely pointing to strength in enterprise and margin upside this quarter, and bears flagging negative trends in forward growth and free cash flow.

Evercore ISI analyst Peter Levine cut his price target on Zoom Video to $235 from $255, while keeping an in-line rating. 

While Zoom's results came in better than expected when "considering all the moving parts," Levine said the growth trajectory remained unclear looking out to fiscal 2023.

He expects margins to narrow in fiscal 2023 as the company steps up investments in research and development and in sales and marketing. 

Investors will need some patience for now, Levine said, as he did not see any catalysts that would change the sentiment on the stock.