Zoom Communications (ZM) could benefit from stronger enterprise demand, wider AI use, product expansion and more customers moving away from older communications systems, while slower online growth and near-term margin pressure remain risks to watch, RBC Capital Markets said in a note Tuesday.
According to the note, the company's enterprise business could keep improving as the company sells more products, moves further into larger customers, expands its sales channels and reduces customer losses.
Zoom could also win more business as companies replace older on-premise phone systems, with nine of its 10 largest phone deals in fiscal Q2 involving customers moving away from such systems to Zoom's AI services, the note said.
Online revenue remains a key concern because more customers are using AI tools instead of traditional search, while pricing comparisons and less help from foreign exchange could add pressure in H2, according to the note.
RBC maintained its outperform rating on Zoom and its $130 price target, saying that it expects costs tied to AI trials and the Common Room acquisitions to ease over time, while Zoom's technology setup and wider product use could support gross margins near its long-term 80% goal.
Price: $93.66, Change: $-7.27, Percent Change: -7.20%