Jefferies Upgrades Zoom Video Communications Rating to Buy

Investing.com — Jefferies has upgraded its rating on Zoom Video Communications (NASDAQ:ZM) from Hold to Buy, citing several reasons for optimism regarding the company's future towards 2025.

Jefferies raised its price target for Zoom shares from $85 to $100, anticipating an improvement in revenue growth and better integration of the company into enterprise workflows.

Zoom shares saw an increase of over 2% in premarket trading on Thursday.

The upgrade reflects Jefferies' belief that Zoom's strategy to monetize product innovations, particularly through the AI Companion Add-On launching in the first half of 2026, is a positive shift. Analysts argue that even a modest uptake of this feature could lead to substantial revenue increases.

They estimate there are over 32 million total enterprise seats, assuming an average user pay of just $7 per month. If only 5% of these seats adopt the AI Add-On in FY26, it could significantly boost the company’s revenue growth.

> “Our calculations suggest that the AI Add-On could contribute approximately 2 percentage points to Enterprise revenue growth and around 1 percentage point to total revenue growth,” said the analysts led by Samad Samana.

The company is also anticipated to increase its platform's user retention and reduce churn by incorporating AI products into enterprise workflows. The AI Companion 2.0 is designed to work not only within Zoom but also with other applications like Microsoft (NASDAQ:MSFT), Google (NASDAQ:GOOGL), and various third-party apps, potentially transforming Zoom into a critical enterprise solution rather than just a communication tool.

Furthermore, Jefferies emphasizes that management has set pragmatic expectations for fiscal year 2026, suggesting that growth rates expected by the end of FY25 will be strong indicators. Zoom’s average monthly churn rate has reached multi-year lows, indicating potential for unexpectedly high online revenue growth.

> “We see potential for this shift to enhance both growth and customer retention, while also alleviating concerns about competitive disruption,” analysts noted.

On the financial front, Jefferies highlighted Zoom's net cash balance of $7.7 billion, which provides room for further stock buybacks, evidenced by an additional $2 billion authorization during the third-quarter fiscal year 2025 earnings report, and the possibility for strategic mergers and acquisitions.

Regarding valuation, analysts assert that Zoom shares are currently undervalued, suggesting an opportunity for positive re-rating as the company addresses long-term strategies and competitive issues.