Zoom dips 10% in premarket trading as Wall Street cuts price targets on earnings

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  • Shares of Zoom fell in premarket trading on Tuesday after the video-chat company warned investors of a revenue slowdown.
  • The report prompted some firms to cut price targets on the stock.

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Shares of Zoom fell 10% in premarket trading on Tuesday after the video-chat company warned investors of a slowdown in revenue growth, prompting some firms to cut price targets on the stock.

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Zoom was one of the pandemic darlings, moving from a relatively niche business software segment to a home product. Over the past two years, millions of people have used the company’s technology to stay connected at school, work or socializing. But as people return to work and school, growth is slowing.

BTIG, which lowered its price target from $460 to $400, reiterated its buy rating, but said the cut “better reflects current market sentiment and group multiple compression.”

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Deutsche Bank Research also lowered its 12-month target from $350 to $280.

“While we’re positive on Zoom’s strategic initiatives and investments in key growth areas, we find it hard to prefer a stock with more rapidly declining growth and incremental pressure on profitability,” the researchers wrote in a Tuesday note.

Baird, Guggenheim, Wells Fargo, Stifel, UBS, Piper Sandler and KeyBanc also dropped their price targets. But Wall Street is still generally bullish about Zoom’s future.

“Growth has been muted, and this could continue as a near-term stock headwind, although we remain positive on the long-term growth and platform opportunity, particularly growth,” Baird researchers wrote Tuesday. The rate is lower in the next few quarters.”

Zoom’s revenue grew 35% in the year-ago quarter, which ended October 31, slowing from 54% growth in the prior quarter. For the fiscal fourth quarter, Zoom forecast adjusted earnings of $1.06 to $1.07 per share in revenue of $1.051 billion to $1.053 billion, meaning a 19% increase.

— Businesshala’s Michael Bloom and Jordan Novett

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