By Senad Karaahmetovic
Zoom Video Communications Inc (NASDAQ:ZM) stock is down by nearly 2% in pre-market Wednesday after Citi analysts reiterated a Sell rating and slashed the price target.
The analysts see more downside for Zoom stock as the company continues to navigate a difficult macro environment. Therefore, Zoom stock price target is cut by $4 to $72 per share, implying a downside potential of over 17% relative to yesterday’s closing price of $87.44.
“ZM's post-COVID recovery, may continue to falter in Q3 as tightening IT budgets and a weaker macro outlook keep SMB new customer acquisitions low and churn elevated. We see the hurdles from last Q holding, with rising competition (MSFT/Teams), macro-related weakness, and further margin risk from mix shift,” the analysts said in a client note.
While Zoom continues to make progress on some initiatives, including the Phone, the analysts say aforementioned headwinds “will more than offset new product strength and create downside risk to guidance and consensus estimates post Q.”
As a result, the analysts have cut estimates, which puts them below Street in terms of revenue and free cash flow (FCF) for FY24.
“With worsening growth prospects and rising competitive risk, we maintain Sell/High Risk rating and see more downside ahead,” they concluded.
Zoom stock price is down over 52% year-to-end (YTD) after staging a 20%+ rebound in recent weeks.