UBS has reiterated its Neutral rating on Zoom Video Communications Inc. (NASDAQ: ZM), citing mixed revenue trends despite a second-quarter performance that exceeded expectations.
The bank maintained a price target of $115 for Zoom, below the $130 target set by RBC Capital but above Bernstein’s $108 target. UBS highlighted an 8% year-over-year revenue increase in Q2, driven by an acceleration in enterprise segment growth to 7.8%, the strongest in three years and now accounting for 62% of total sales. Total revenue reached $1.28 billion, surpassing the $1.27 billion consensus estimate.
However, the online segment’s growth slowed to 1% year-over-year in Q2 from 3% in the prior quarter, reflecting uneven demand. For the fiscal year 2027, UBS maintained its second-half revenue outlook at approximately 4% in constant currency, though it noted that the enterprise segment’s strength and contributions from the Common Room acquisition could support a potential upward revision of $10 million to $20 million in guidance.
Free cash flow projections for FY2027 were raised by $80 million to about $1.8 billion, partly due to a two-year extension in the useful life of data center assets. Gross profit margins remained robust at 77.66%, while the company’s enterprise value traded at roughly 11 times free cash flow for 2027, adjusted for its $3.13 billion stake in Anthropic.
Zoom’s stock has gained 33.6% over the past six months, trading at a P/L ratio of 14.89 and a PEG ratio of 0.05. InvestingPro assigned the company a financial health score of 3.34 out of 5, described as 'Great.'
