Morgan Stanley analyst Keith Weiss is positive on Zoom Video Communications (NASDAQ:ZM) ahead of the Q1 print.
The analyst reiterated an Overweight rating but lowered the price target to $140.00 per share, down from $165.00. Weiss argues that the current valuation (shares down nearly 50% YTD), has built-in “too much skepticism on growth.”
“We see FQ1 earnings as a catalyst to disprove the overly bearish sentiment on ZM around FY23growth. Reason being, renewals for contracts signed in the early stages of COVID will have passed for another year in the March/April timeframe, which will provide a better view into Enterprise customer retention. Our checks on the UCaaS space during the quarter highlighted that video conferencing licenses are not being cancelled, even where customers have opted to centralize collaboration on Teams. Our survey work also shows a similar dynamic, as video conferencing is key to future workplace strategies (see our recent Return to Office Survey) and most CIOs intend to maintain multiple video licenses due to different employee preferences and use cases (see our recent CIO Survey),” Weiss said in a client note.
“We could be too optimistic if the <10 employee cohort sees greater churn than expected, a positive for LT value proposition, but a challenge to near-term PT achievement,” Weiss concluded.
Zoom stock closed at $94.84 on Friday.
By Senad Karaahmetovic