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


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


(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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