UPDATE: Zoom Video (ZM) PT Lowered to $157 but Piper Sandler Sees FCF Creating a Buy Level
Piper Sandler analyst James Fish lowered the price target on Zoom Video (NASDAQ: ZM) to $157.00 (from $299.00) after FQ4 results were mixed with the top-line upside muted, net-adds down Q/Q, metrics changing next quarter, and the FY23 guide of +11% Y/Y...below expectations. However, the $189M FCF would have beaten the expectation for $250M without the $85M litigation payment to RingCentral.
The analyst reiterated an Overweight rating, stating "Our new 27.5x EV/CY23E FCF multiple represents a slight discount relative to peers, as Zoom is still working through the transition from online customers to enterprise growth. Our valuation also fits into our EV/Rev Adjusted for Growth (“ERAG”) framework analysis for GARP names as Zoom has transitioned out of hypergrowth status following the FY23 guide. We previously valued ZM based on SOTP multiple inclusive of 20x EV/CY23E ">10 Employee" Revenue of $4.25B, and 1.0x EV/CY23E "<10 Employee" Revenue of $1.174B."