Investing.com -- Wedbush analysts upgraded Zoom Video Communications (NASDAQ:ZM) from Neutral to Outperform on Thursday, raising the price target from $80 to $85.
The analysts cite growing confidence in Zoom's enterprise business, stabilizing churn, and new opportunities in the contact center segment as key reasons for the optimistic outlook.
"We are upgrading our rating...as the company expects to see a re-acceleration in growth across enterprise customers while seeing its churn stabilize," Wedbush wrote.
Wedbush notes that Zoom's core products are now unified via its communications platform, Zoom One, which integrates meetings, phone, chat, and more.
Wedbush believes the company's broad product portfolio enables "strong upsell and cross-sell opportunities," with customers increasingly subscribing to multiple products.
Notably, Wedbush says 13% of enterprise customers now use three or more Zoom products, contributing 66% of the company's total annual recurring revenue (ARR).
The firm highlights promising growth in Zoom's expansion into the contact center segment. While the contact center product (CCaaS) is on a slower growth path compared to the earlier success of Zoom Phone, Wedbush believes it will still hit a $400 million run rate within four years.
Zoom Phone "took ~4.5 years from launch to reach ~10% of revenues, but this might take slightly longer with ZM representing a much larger revenue base while expecting solid upside as it tracks closely with Zoom Phone, making it likely to reach ~$400 million run rate in ~4 years after launch" noted Wedbush.
Wedbush also said Zoom's churn rate has improved to 2.9% after stricter payment enforcement. The stability is expected to drive enterprise revenue growth throughout the second half of 2025 and accelerate into fiscal 2026.
"Churn decreased...bringing more stability to its net retention rate," the firm states.
Despite growing competition from Microsoft (NASDAQ:MSFT) Teams, Google (NASDAQ:GOOGL) Workspace, and other UCaaS providers, Wedbush sees Zoom well-positioned to address a $235 billion addressable market by 2028.