LegalZoom Upgraded to Overweight at JPMorgan, Shares Rise 6%

JPMorgan raised its price target on LegalZoom.com (NASDAQ:LZ) to $12 from $11 and added the stock to its Analyst Focus List, maintaining an Overweight rating as it sees room for outperformance in both revenue and earnings.

The firm believes LegalZoom is well-positioned to exceed Street expectations, citing accelerating subscription revenue growth through 2025 and a strategic transformation that strengthens its long-term defensibility.

Valuation remains a key part of the bullish thesis: shares trade at just 7x 2026E EV/EBITDA—well below comparable SMB-focused tech firms like GoDaddy and Wix, which trade at 15x and 16x, respectively.

JPMorgan anticipates that as the company executes on its growth strategy and investor confidence builds, the valuation gap with peers will narrow, potentially driving a re-rating in the stock.

LegalZoom.com Inc. (NASDAQ:LZ) shares rose more than 6% intra-day today after JPMorgan analysts upgraded the stock from Underweight to Overweight, raising the price target to $9.00 from $8.00. The decision reflects growing optimism for the company as it enters 2025, driven by encouraging business formation trends and expectations of stronger profitability guidance.

Business formations, a key indicator of LegalZoom's market potential, showed a positive shift in late 2024. Data from November and December demonstrated resilience on both year-over-year and month-over-month comparisons, marking a reversal from the steep declines that characterized much of the year. This turnaround signals a potential recovery in demand for LegalZoom’s services.

In addition to improving market conditions, LegalZoom’s operational cost reductions from its 2024 restructuring efforts are expected to drive better-than-anticipated profitability in 2025. According to the analysts, the company’s management is likely to guide adjusted EBITDA at a midpoint that exceeds current market expectations by at least 5%. Analysts project a year-over-year EBITDA increase of $15 million for 2025, significantly outpacing the Street's conservative estimate of $8 million.

Given these factors, LegalZoom has been placed on Positive Catalyst Watch ahead of its fourth-quarter earnings release in February.

LegalZoom (NASDAQ:LZ) shares plummeted over 25% on Wednesday following the announcement of a new CEO and a downward revision of its full-year revenue forecast.

The company disclosed that Jeffrey Stibel, currently the Chairman of the Board of Directors, has been appointed as the new CEO effective immediately. Additionally, John Murphy has been named the Lead Independent Director of the Board.

Outgoing CEO Dan Wernikoff decided to leave the company and resign from the Board, stating that the transition is timely as LegalZoom shifts its focus towards subscription-based revenue to achieve long-term profitable growth.

For the second quarter, LegalZoom maintains its revenue projection between $172 million and $176 million, with adjusted EBITDA expected to be between $25 million and $27 million.

However, for the full year, the company revised its revenue forecast downward to a range of $675 million to $685 million and reduced its free cash flow expectation to between $75 million and $85 million.

Despite these adjustments, LegalZoom reiterated its full-year adjusted EBITDA guidance, which remains in the range of $135 million to $145 million.

LegalZoom (NASDAQ:LZ) shares plummeted over 25% on Wednesday following the announcement of a new CEO and a downward revision of its full-year revenue forecast.

The company disclosed that Jeffrey Stibel, currently the Chairman of the Board of Directors, has been appointed as the new CEO effective immediately. Additionally, John Murphy has been named the Lead Independent Director of the Board.

Outgoing CEO Dan Wernikoff decided to leave the company and resign from the Board, stating that the transition is timely as LegalZoom shifts its focus towards subscription-based revenue to achieve long-term profitable growth.

For the second quarter, LegalZoom maintains its revenue projection between $172 million and $176 million, with adjusted EBITDA expected to be between $25 million and $27 million.

However, for the full year, the company revised its revenue forecast downward to a range of $675 million to $685 million and reduced its free cash flow expectation to between $75 million and $85 million.

Despite these adjustments, LegalZoom reiterated its full-year adjusted EBITDA guidance, which remains in the range of $135 million to $145 million.

LegalZoom (LZ:NASDAQ) is on the brink of revealing its financial performance for the quarter ending March 2024, with expectations set for a notable uptick in both earnings and revenue. The forecasted earnings of $0.10 per share represent a substantial 42.9% increase from the previous year, while revenue is anticipated to climb by 5.4% to $174.87 million. This optimistic outlook is underpinned by the company's recent trading activity, where LZ's stock price has ascended to $12.16, reflecting a 1.76% increase. This price movement is part of a broader trend that has seen the stock fluctuate between $11.895 and $12.43 in a single day, showcasing the market's reactive nature to the company's financial health and prospects.

Despite the positive revenue and earnings projections, the unchanged consensus EPS estimate over the last 30 days suggests a cautious stance from analysts, possibly due to the Earnings ESP (Expected Surprise Prediction) model indicating a -1.96%. This model, which aims to forecast the likelihood of an earnings beat, points to a potential shortfall against the consensus EPS estimates. However, it's crucial to note that LegalZoom has a history of outperforming expectations, as evidenced in the previous quarter where it posted earnings of $0.13 per share, surpassing the anticipated $0.10 and delivering a surprise of +30%. This track record of exceeding consensus EPS estimates in three out of the last four quarters may offer some reassurance to investors.

The company's current market position, with a market capitalization of approximately $2.3 billion and a trading volume of 1,053,812 shares, further highlights its significance within the NASDAQ exchange. This financial stature, combined with the stock's performance range over the past year—from a low of $6.89 to a high of $15.68—illustrates the volatility and potential growth opportunities that LegalZoom presents to its investors.

In the broader context of the Zacks Industrial Services industry, LegalZoom's anticipated financial results contrast with those of its peer, TPI Composites, which is expected to report a loss of $0.68 per share for the same quarter. This comparison not only underscores LegalZoom's relative financial health but also its potential resilience in a challenging market environment.

As the earnings report date of May 7, 2024, approaches, investors and market watchers alike will be keenly observing how LegalZoom's financial performance aligns with these projections. The combination of anticipated year-over-year growth in earnings and revenue, alongside the company's recent stock performance and market valuation, paints a picture of a firm that is navigating its financial journey with a degree of success, albeit with the cautionary note provided by the Earnings ESP and Zacks Rank.