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Zoom Video Communications (NASDAQ: ZM) shares rose early Tuesday after investment firm Benchmark upgraded the stock, noticing it still had space grow, even if it is at a lower level.
Analyst Matthew Harrigan raised his rating to buy from hold and put a “conservative” $ 124 target price, indicating about 30% from current levels, noting that earnings are likely to grow only of approximately 11% in fiscal 2023, which is less than Zoom’s growth in the past.
“We acknowledge that we were surprised at the opportunity to upgrade Zoom’s stock to its current level because we have a high view of management, especially CEO Eric Yuan, and feel that the current price attaches no credibility to Zoom’s realized the platform’s “happiness” ambitions, ”Harrigan wrote. on a note to clients.
Zoom (ZM) shares rose more than 2% to $ 96.62 in premarket trading on Tuesday
In addition, Harrigan said that because the market is currently unwilling to pay for long-term growth, Zoom still has approximately 4.5% free cash flow yield for 2023 and there are three pillars of growth for it, including its unified communication platform, including Zoom Meeting, Telephone, Room and Event.
It also has a shift to hybrid work and the change in workflow as the future of work changes following the pandemic, incorporating other platforms such as DocuSign (NASDAQ: DOCU)Service Today (NYSE: NOW) and Asana (NYSE: ASAN).
In addition, Zoom (ZM) may see increased spending, as less than 20% of Global 2000s spend more than $ 100,000 on Zoom.
“Management remains particularly confident on the winning side as sales patterns are normal for proof of concept and RFPs,” Harrigan explains.
In January, Morgan Stanley said Zoom’s (ZM) position was not appreciated by the market and growing interest in Microsoft Teams was not leading to cancellations.