Visits to Zoom Video Communications in the U.S. Show Signs of Improvement

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By Karishma Vanjani

Citi analysts have reported that visits to Zoom Video Communications in the U.S. are starting to improve, according to a research note released on Friday.

After maintaining a “Sell” rating for almost 18 months, Tyler Radke and his team upgraded the stock of the video meeting software company (ticker: ZM) to “Neutral.” They believe that there is now a more balanced ratio between risks and potential rewards for investing in the stock at its current level.

In premarket trading on Friday, Zoom’s stock saw a 2.3% increase, reaching $64.87. Meanwhile, futures on the S&P 500 rose by 0.3%.

Despite the positive outlook, the company still faces significant challenges due to increasing competition from Microsoft Teams and its high exposure to small and medium enterprises. Radke pointed out that there is a higher likelihood of these businesses discontinuing their accounts.

However, there are potential signs of stabilization in visits to Zoom, as well as an improvement in IT budgets at other companies, which bodes well for the stock. The recent increase in job postings at Zoom further indicates management’s growing confidence, according to Radke.

Recent data from a Citi survey shows that visits to Zoom declined by 12% in October compared to the same month last year. However, this decline is less than the drops of 20% seen in each of the previous three months and the 25% slide observed in June. This suggests that the trend is heading in a positive direction.

Zoom is scheduled to release its third-quarter earnings on Monday after the market closes. While management has forecasted sales of $4.485 billion to $4.495 billion for the fiscal year ending in January 2024, Radke believes this estimate to be conservative and suggests the result could be even better.

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