Shares of Zoom closed down 14.71 percent Tuesday after the video-chat company warned investors of a revenue growth slowdown, leading Wall Street firms to cut price targets on the stock.
Zoom was one of the pandemic darlings, going from a relatively niche business software segment to a household product. Millions of people used the company’s tech over the past nearly two years in order to keep up with school, work or socializing. But growth is slowing as people return to work and school.
BTIG, which lowered its price target to $400 from $460, reiterated its buy rating but said the cut was to “better reflect current market sentiment and group multiple compression.” Deutsche Bank Research also lowered its 12-month target to $280 from $350.
“While we’re positive on Zoom’s strategic initiatives and investments in key growth areas, we find it tougher to like a stock with more sharply decelerating growth and incremental pressure on profitability,” Deutsche Bank wrote in a note Tuesday.
Baird, Guggenheim, Wells Fargo, Stifel, UBS, Piper Sandler, and KeyBanc also dropped their price targets. But Wall Street is generally still bullish on Zoom’s future.
“Moderating growth has been, and could continue to be a near-term stock headwind, though we remain positive on the long-term growth and platform opportunity particularly as the growth rate troughs over the next couple quarters,” Baird researchers wrote Tuesday.
Zoom’s revenue increased 35 percent from a year earlier in the quarter, which ended Oct. 31, slowing from 54 percent growth in the quarter before. For the fiscal fourth quarter, Zoom forecast adjusted earnings of $1.06 to $1.07 per share on $1.051 billion to $1.053 billion in revenue, which implies 19 percent growth.