Morgan Stanley analyst Meta Marshall upgraded Zoom Video (ZM) to Overweight as he believes the stock’s valuation has “turned too negative” on near-term churn concerns ahead of catalysts in the second half of 2021. Further, the analyst sees a “positive setup” into Zoom’s second quarter results.
BUY ZOOM VIDEO: Morgan Stanley analyst Meta Marshall upgraded Zoom Video to Overweight from Equal Weight with a price target of $400, up from $360. The stock’s valuation has “turned too negative” on near-term churn concerns ahead of catalysts in the second half of 2021, Marshall told investors in a research note. The analyst thinks enterprise momentum, combined with margin headwinds dissipating, creates a “positive setup” into Zoom’s second quarter results. Revenue expectations are “doable,” and when combined with the upcoming Zoomtopia conference and fiscal 2023 guidance in a couple of quarters, a more optimistic stance on the stock at current valuation is warranted, Marshall argued.
OUTLOOK: During the company’s last earnings conference call, Zoom Video said it sees second quarter earnings per share between $1.14-$1.15, with consensus $1.16, and revenue between $985M-$990M, with consensus at $990.96M. For full year 2022, the company sees earnings per share of $4.56-$4.61, with consensus $4.67, and revenue of $3.975B-$3.99B, with consensus $4.01B.
FIVE9 ACQUISITION: Last month, Zoom Video announced it had entered into a definitive agreement to acquire Five9 (FIVN) in an all-stock transaction valued at $14.7B. As part of the agreement, Five9 stockholders will receive 0.5533 shares of class A common stock of Zoom Video for each share of Five9. The boards of Zoom and Five9 have approved the transaction. Following the close of the transaction, Five9 will be an operating unit of Zoom and Rowan Trollope will become a President of Zoom and continue as CEO of Five9.
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