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Zoom Video Communications still has postpandemic growth opportunities, KeyBanc says.

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Zoom Video Communications

shares spiked higher Thursday after KeyBanc Capital turned bullish on the stock, on the theory that the company will be a major beneficiary from the adoption of hybrid work environments.

Analyst Steve Enders boosted his rating on Zoom stock to Overweight from Sector Weight, setting a price target of $428, about 16% above Wednesday’s closing level. The stock jumped 5.3% to $389.06 in recent Thursday trading, and is up 15.4% year to date.

The analyst says Zoom (ticker: ZM) will be a winner in an environment in which video and cloud communications are long-term priorities in enterprise IT budgets.

Enders writes that a survey of chief information officers finds that enterprise adoption of video platforms will continue in 2022 as businesses return to office environments, with 97% of respondents planning to maintain or boost spending. He thinks that is a natural outcome from a shift to hybrid work environments, with an estimated 40% of employees likely to routinely work from home in the long term.

The survey also found continued growth in adoption of “unified communications as a service” software, which should boost demand for Zoom Phone, the company’s cloud-based telephony service. Enders says the company can reach 4 million Zoom Phone users by the January 2023 fiscal year, at that point generating more than $500 million in annual revenue, or about 10% of total revenue.

Longer term, he contends, Zoom has an opportunity to become a broader cloud communications platform, and it has taken a step in that direction with the recent announcement of plans to acquire the call center software company

Five9

(FIVN). The deal “should transform Zoom’s model and support a second leg to growth,” he writes, as it prepares to navigate a postpandemic hybrid world. 

Write to Eric J. Savitz at eric.savitz@barrons.com

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