Zoom Video (ZM) PT Lowered to $162 at BofA Securities as Reopening Will Test Customer Retention

BofA Securities analyst Daniel Bartus lowered the price target on Zoom Video (NASDAQ: ZM) to $162.00 (from $200.00) after 1Q23 revenue was in line with consensus but non-GAAP operating beat expectations. Customers with >10 employees were a weak point, with revenue falling -1.5% q/q (versus -0.4% in 4Q22) and NRR declining -10bp q/q to 119%. Revenue from Enterprise customers increased 4.1% q/q (versus 4% in 4Q22) and TTM NRR fell 700bp q/q to 123%. Headwinds in EMEA related to FX and Ukraine pressured growth by approximately 100bp.

The analyst reiterated a Neutral rating, stating "the Zoom story remains tethered to customer retention and enterprise expansion opportunity. With regard to online customer retention, management expects churn rates to moderate in 2HF23 as customer cohorts age. We believe the improvement could be uneven as the COVID-19 reopening headwinds and return to work pressures potentially apply greater than projected pressure on historic churn trends."

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