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Citi analysts reiterated a Sell rating on Zoom Video Communications (NASDAQ:ZM) on concerns around a lack of revenue growth in 2024.
The price target of $67 per share implies a downside risk of about 7.5% relative to yesterday’s closing price. The online communications company is due to report its earnings on February 27, after the market close.
“We remain sellers of ZM despite positive headlines on margins post recent restructuring news,” they wrote in a client note.
Earlier this month, Zoom announced it is laying off about 1,300 employees, or roughly 15% of its workforce. Moreover, CEO Eric Yuan and other top executives will take pay cuts. Still, the analysts remain concerned about forward estimates and growth prospects.
“Our primary concern is the Online segment which has structurally high churn rates (~40% annualized) making the business inherently reliant on new SMB customer acquisition, which has been a challenge for software companies in F4Q. While we are relatively more optimistic on the enterprise side, we still see ramping competition from Teams and elevated deal scrutiny driving slowing growth,” the analysts added.
Along these lines, they further cut below-Street estimates.
“We believe ZM may struggle to maintain positive y/y revenue growth as the more profitable Online/SMB business continues to decline from pull-forward/macro/competitive headwinds,” the analysts concluded.
Zoom shares closed at $72.47 yesterday.
