UBS analyst Karl Keirstead reiterated a Neutral rating on Zoom Video Communications (NASDAQ:) and lowered the price target to $100.00 per share from $130.00 ahead of earnings next week.
A survey of roughly 400 IT decision makers on Zoom yielded not enough evidence for Keirstead to move to a Buy rating. The three key takeaways from the survey are:
60% of respondents said that their spending growth with Zoom in 2022 would be 5% or less, with 85% saying that spending growth would be 15% or less. Keirstead notes that this implies minimal upside to the guidance;
92% of respondents said they were considering consolidating video conferencing tools, with 67% saying they planned to do so in the next 12 months. Most respondents were keen on Microsoft Teams (NASDAQ:) with Zoom coming in as close second;
The data on spending intentions with both Zoom Phone and Zoom Rooms showed that these products were not material growth drivers yet.
On valuation, the analyst said that multiples are “washed-out and close to a bottom” after a major selloff.
“While in our view this makes the near-term stock set-up better for Zoom than for DocuSign (NASDAQ:), we’re still held back by a) these UBS Evidence Lab survey results, which didn’t point to material revs upside and b) our view that the FY23 revs guide is not a slam dunk and if growth falls short, Street FCF estimates might also be at risk,” the analyst concluded.
By Senad Karaahmetovic