Zoom Video
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Zoom Video Communications was rising Friday after J.P. Morgan upgraded the stock to Overweight from Neutral and said growth at the videoconferencing company will rebound.
J.P. Morgan highlighted how the UCaaS (Unified Communications as a Service) market has been rerated lower on concerns of a growth slowdown and worries about Microsoft
‘s ability to capture share through Teams and Teams Calling.
But now the analysts see Zoom Video (ticker: ZM) benefiting from the continuing migration to cloud as employees get more comfortable with video collaboration.
“We see large enterprises looking to focus more on UCaaS platforms that can bring together video, calling, contact center, CPaaS, chat/task management,” J.P. Morgan wrote in a note.
“We believe growth will bottom in the fourth quarter but think the market has priced that into the current stock price such that the risk/reward looks more attractive,” wrote the analysts.
“After a couple more difficult comps we expect stabilization or re-accelerationin Zoom’s growth to lead to multiple expansion,” they added.
J.P. Morgan has a price target on the stock of $385.
Read more: Tech Earnings Will Be Dominated by Shortage Talk. Investors Beware.
The stock rose 3.76% to $285.10 on Friday. It has declined 15% year to date. The stock’s high for the year was $444.51, reached in February.
J.P. Morgan also pointed to data released by the company that showed customers were continuing to sign up to the platform.
“For customers who had signed up 13+ months ago the churn was better than historical averages which tells us that the product improvements and capabilities are leading to increased stickiness for those that have an ongoing need for video communication,” the analysts said.
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