Zoom Video Share-Price Target Lifted on Paid-User Potential

Zoom Video's potential to draw more paid users prompted Baird to lift its price target on the company's shares by 30%.
Author:
Publish date:

While only a small number of Zoom Video's ZM free users plan to upgrade, they will provide a tailwind to its meetings and phone revenue, according to a Baird analyst, who raised his price target for the videoconferencing company to $300 from $230.

Shares of the San Jose, Calif., company at last check were up 0.2% to $262.31.

Analyst William Power, who affirms an outperform rating on the shares, said its survey showed that roughly 45% of its consumer respondents said they have used it. And even as only a single-digit percent of free users plan to convert to paid, they'll provide a meaningful boost to enterprise meetings and phone revenue, he said.

The company recently named Jason Lee chief information security officer. He'd held security positions at Salesforce  (CRM) - Get Report and Microsoft.  (MSFT) - Get Report

 Zoom Video's use has skyrocketed during the coronavirus pandemic, as businesses complied with social distancing requirements. 

One key downside: Users have complained about intruders hacking into meetings. In its introduction of Lee, Zoom Video said it was "nearing the end of its 90-day security and privacy plan, put into place during" that period of unprecedented growth. 

In June, Zoom reported sales of $328.2 million for the fiscal first quarter, well more than double the year-earlier figure and outpacing the analyst consensus of $203.5 million. Its earnings of 9 cents a share were in line with estimates.

Business users drove Zoom’s quarter, with the company reporting growth quadrupled among customers with more than 10 employees and increasing 90% among those contributing more than $100,000 in revenue.

For the full fiscal year ending January 2021, Zoom is guiding for $1.78 billion to $1.8 billion of revenue, compared with its initial guidance of $905 million to $915 million. 

For the current quarter, Zoom said expects revenue of $495 million and $500 million.