Zoom Video (ZM) PT Lowered to $67 at Citi, 'Hitting growth fatigue with weaker Q4 outlook'

Citi analyst Walter Pritchard lowered the price target on Zoom Video (NASDAQ: ZM) to $67.00 (from $72.00) while maintaining a Sell rating.

The analyst comments "While reported revenue cleared a low bar, Zoom’s Q3 results did little to assuage concerns around slowing growth with a disappointing Q4 outlook and the leading billings indicator targeted to decline HSD exiting 2022. These results and outlook suggest further downside risk to consensus estimates in FY24 (where we are 4-5 pts below). Although profitability has outperformed guidance, Non-GAAP margins continue to deteriorate as mix-shift to Enterprise and hiring/spending growth far outpace revenue. While shares looks cheap at ~17x NTM EV/FCF, cash flow quality is a concern with high SBC(24% of revs/78% of FCF), especially relative to low-growth/value peers. Following Q3, we don’t make significant estimate changes as our estimates were already considerably below the street. We maintain our Sell/High Risk rating as we expect growth to keep slowing into 2023, with deteriorating profitability as Zoom faces a worsening demand/competitive environment. Our TP moves to $67 on updated regression."

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