Tuesday, Jefferies began coverage on shares of Zoom Video Communications (NASDAQ:ZM), issuing a Hold rating with a price target of $70.00. The firm noted Zoom's status as a leading collaboration platform while also acknowledging the company's current transition phase.
Management anticipates lower growth and margin compression in the fiscal year 2025 as they reposition Zoom for future growth prospects.
The report highlighted Zoom's focus on launching new products that could act as a growth tailwind. However, Jefferies indicated a cautious approach, preferring to see how these products perform in a competitive market, particularly against rivals like Microsoft (NASDAQ:MSFT).
Jefferies pointed out Zoom's strong financial position, with the company holding approximately $7 billion in cash. This capital management, along with what Jefferies considers a reasonable valuation at around 13 times the calendar year 2025 earnings per share (EPS), is expected to support the company's stock price.
The analyst's remarks underscored the strategic efforts by Zoom to align itself for improved growth in the future. The Hold rating suggests a neutral stance, implying that the stock might not experience significant movement in the near term, but has potential stability due to its financial strength and market positioning.
The price target of $70 represents Jefferies' expectation of where the stock will trade in the near future, based on the company's fundamentals and market dynamics as observed by the firm.
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