On Tuesday, FBN Securities adjusted its outlook on Zoom Video Communications Inc (NASDAQ:ZM), reducing the stock price target to $95 from the previous $105, while maintaining an Outperform rating on the company's shares. The revision follows Zoom's fiscal fourth-quarter report, which indicated a year-over-year revenue increase of 3%—marginally above consensus expectations.
The analyst noted that Zoom's billings and remaining performance obligations (RPO) also experienced growth, exceeding consensus estimates. Despite a slight shortfall in the fiscal 2025 revenue guidance compared to consensus, the company's non-GAAP (NG) earnings per share (EPS) forecast was higher than expected. This positive NG EPS outlook is anticipated to bolster the stock's performance.
Zoom's report highlighted a decrease in sales and marketing (S&M) expenses, which contributed to the stronger-than-expected NG EPS for the quarter. The company has continued its efforts to optimize operations, announcing a 2% workforce reduction in February 2024, following a more significant cut the previous year. The aim is to uphold robust operating margin and free cash flow (FCF) margin levels.
For fiscal 2025, Zoom is guiding an adjusted free cash flow between $1.44 billion and $1.48 billion, which reflects healthy margins after adjustments. While the company's stock-based compensation (SBC) as a percentage of revenue remains high, there has been a year-over-year improvement.
The analyst also highlighted potential growth opportunities for Zoom with the introduction of new products such as Contact Center, Phone, and AI/chat features. Additionally, Zoom's $1.5 billion share repurchase authorization is seen as a positive move that could provide further support to the stock.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.