Zoom Video Communications Inc ZM has the potential to be the next great platform, according to an analyst at Morgan Stanley.
The Zoom Video Analyst: Morgan Stanley analyst Meta Marshall upgraded Zoom Video shares from Equal-weight to Overweight and increased the price target from $360 to $400.
The Zoom Video Thesis: Zoom Video's valuation has turned too negative ahead of the catalysts in the back half of the year, primarily due to near-term churn worries, analyst Marshall said in a note.
The company's growth is likely to be higher than expected over the next 12 months, the analyst said.
Multiple growth drivers, the analyst said, are Zoom Video's international business, upmarket penetration and Phone, with the former two being more impactful.
With about 400mm seat opportunity and an estimated 20 to 25 million paid users, Zoom Video still has plenty of opportunity for customer growth, Marshall said.
Enterprise momentum and dissipating margin headwinds create a positive setup into the fiscal second quarter, the analyst said.
"While revenue expectations are not low, we believe they are doable, which combined with upcoming Zoomtopia and FY23 guidance in a couple of quarters, leaves us more optimistic on the stock at current valuation,' Marshall said.
A revenue beat of 5% or greater, the analyst said, would cause a positive reaction in the stock.
"We believe growth over the next year is likely to surprise to the upside," Morgan Stanley said.
ZM Price Action: At last check, Zoom Video shares were up 1.84% to $344.04.
Photo: Courtesy Zoom
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