On Wednesday, Raymond James resumed coverage on LegalZoom.com Inc (NASDAQ:LZ) stock, assigning a Market Perform rating. The decision reflects the firm's view of the stock's valuation, which is in line with the small and medium-sized business (SMB) peer group average, and takes into account the company's potential growth balanced against the current economic landscape.
LegalZoom's shares are currently trading at 13.6 times the estimated 2025 enterprise value to EBITDA (EV/EBITDA), which is close to the SMB peer group's average of 15 times. The analyst cited a 123% spread between the bull and bear case scenarios, indicating significant volatility in the stock's potential future performance.
The coverage notes substantial product advancements at LegalZoom, including the revamping of the management team and updates to the back-end software stack. These improvements have led to innovative product launches such as new accounting and tax offerings, which position LegalZoom to extend its services beyond its legal formation roots into the broader financial software and legal expert sectors.
Despite acknowledging these positive developments, the analyst's projections for business applications suggest a return to standard market conditions following a surge in demand during the COVID-19 pandemic. This adjustment places the firm's 2025 transaction estimates below consensus figures.
The firm has indicated that it will continue to monitor market conditions closely. Should there be an improvement in macro conditions and clearer visibility on subscription bookings, the analyst noted that there might be a potential revision of the current stance on LegalZoom's stock.
InvestingPro Insights
LegalZoom.com Inc (NASDAQ:LZ) has garnered attention with its strategic product developments and potential for growth. To provide investors with a more comprehensive view, InvestingPro data and tips offer additional insights. The company holds a market capitalization of $2.45 billion and is trading at a high earnings multiple, with a P/E ratio of 180.27, which adjusts to 143.68 for the last twelve months as of Q4 2023. This high valuation is underscored by a robust gross profit margin of 63.66% over the same period, reflecting the company's ability to maintain profitability.
InvestingPro Tips highlight that LegalZoom has more cash than debt on its balance sheet, which can be a sign of financial health and stability. Additionally, analysts expect net income to grow this year, providing a positive outlook for potential investors. However, it's worth noting that four analysts have revised their earnings downwards for the upcoming period, which may warrant caution.
For those seeking further analysis, there are additional InvestingPro Tips available that delve deeper into the company's financials and projections. Investors can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, gaining access to these valuable insights. With the next earnings date approaching on May 8, 2024, staying informed with the latest data and expert analysis from InvestingPro could be crucial for making well-informed investment decisions.
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