Optimism Surrounds Zoom Stock as Jefferies Upgrades to Buy

Jefferies has upgraded its rating on Zoom Video Communications (NASDAQ: ZM) from Hold to Buy, citing several factors that instill optimism for the company's future through 2025.

The investment firm also raised its price target for Zoom shares from $85 to $100. This adjustment is based on expectations of improved revenue growth and the company's integration within enterprise workflows.

In response to this upgrade, Zoom shares saw a rise of over 2% during premarket trading on Thursday.

Jefferies believes that Zoom’s strategy to monetize further innovations—especially the anticipated launch of the AI Companion Add-On in the first half of 2026—signals a positive strategic direction for the company. Analysts suggest that even a modest rate of adoption for this new feature could significantly boost revenue growth.

According to Jefferies analysts, there are over 32 million enterprise seats available, assuming an average user subscription fee of just $7 per month. They estimate that if just 5% of these seats opt for the AI Add-On in fiscal year 2026, it could create a scenario where revenue growth accelerates substantially. "Our projections indicate that the AI Add-On could enhance the Enterprise revenue growth rate by approximately 2 percentage points and add about 1 percentage point to the total revenue growth rate," the analysts explained.

Furthermore, Zoom's upcoming AI products aim to make its platform more attractive and reduce customer turnover. The AI Companion 2.0 is designed to work not only within the Zoom environment but also with various applications such as Microsoft, Google, and other third-party apps, potentially evolving Zoom into an essential enterprise tool.

Jefferies also notes that Zoom's management has set achievable expectations for fiscal year 2026. Observations show that the anticipated growth rate heading into the fourth quarter of fiscal year 2025 will serve as a reliable indicator of performance.

In addition, it was noted that Zoom has maintained its average monthly customer churn rate at multi-year lows, suggesting that the company could realize better-than-expected growth in online revenues. The analysts remarked, “We believe this transition has the potential to enhance both growth and retention, while also addressing concerns about competitive disruptions.”

On a financial note, Jefferies highlighted that Zoom’s net cash position of $7.7 billion provides the company with flexibility for further stock buybacks. This is evident from an additional $2 billion stock buyback authorization disclosed during the Q3 earnings report for fiscal year 2025. The excess capital also opens the door for possible strategic mergers and acquisitions.

Regarding stock valuation, analysts contend that Zoom shares are trading at a discount, which may present an opportunity for a positive re-rating as the company continues to tackle long-term strategic challenges and competitive issues.

Zoom, Stocks, FinTech