By Senad Karaahmetovic

Stephen Bersey, Daiwa Capital Markets Analyst, upgraded shares Zoom Video Communications After a significant pullback, (NASDAQ:) will Outperform

Zoom posted better-than-expected earnings. The analyst increased revenue estimates, which results in the new target price of $121.00 per shares, an increase from $107.00. Here are 4 lessons learned from Zoom’s earnings report.

“1) Solid execution in 1Q’23 gives us positive incremental conviction that core business demand is stabilizing. 2) Investor concerns regarding the possibility of further top-line slowdowns will be calmed by good guidance. While we believe that core business is doing well, management should reconsider the extent of its focus on horizontal expansion into Zoom Phone or Contact Center. 4) We focus on core business conditions outside of Zoom Phone and Contact Center efforts and suggest that investors do the same,” Bersey said in a client note.

The analyst is “impressed” by Zoom’s progress within enterprise accounts. Net-net, the analyst sees an “attractive entry point” in Zoom shares as “near-term market growth expectations have tempered.”

“Strategically, we think investors should focus on the company’s core business as we believe that ZM’s valuation is highly dependent on its core business performance. And we view management’s efforts to expand horizontally into IP phones (Internet Protocol based phones) and Contact Center is somewhat of a distraction when weighed against the market opportunity, and window of opportunity, for the company’s core business,” Bersey concluded.

Pre-open Zoom stock prices are up 0.8% today