Credit Suisse Downgrades Zoom Video To Underperform On High Expectations

Credit Suisse analyst Brad Zelnick downgraded Zoom Video Communications (ZM) to Underperform from Neutral with a price target of $105, up from $95.

The stock closed Friday up $6.27 to $128.20. Trading at 40 times 2020 consensus revenue expectations, the current share price embeds significantly greater conversion of free users than an upside model scenario suggests, Zelnick tells investors in a research note. While Zoom is benefiting from having the "best product at the right time," the overall category remains competitive and every unified communication as a service vendor will eventually offer its own video solution, contends the analyst.

Zelnick highlights RingCentral's (RNG) recent announcement to migrate away from white labeling Zoom as an example. Further, Zoom's exponential growth in usage has resulted in additional scrutiny of its technology, leading to a recent spike in security concerns, adds the analyst.

Disclosure: None.

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