LegalZoom’s Sell Rating: Growth Challenges and Sustainability Concerns Amid Strong Buyback Strategy

Analyst Mike McGovern from Bank of America Securities reiterated a Sell rating on LegalZoom (LZ – Research Report) and keeping the price target at $8.00.

Mike McGovern has given his Sell rating due to a combination of factors related to LegalZoom’s financial performance and growth prospects. Despite reporting better-than-expected revenue growth, LegalZoom’s average revenue per user (ARPU) has decreased, and the company faces challenges with lower-than-anticipated business formations. While the company has maintained its fiscal year 2025 targets, the macroeconomic environment is causing headwinds, particularly in business formations, which could impact future growth.
Additionally, although there is an improvement in EBITDA margins due to cost efficiencies, the overall growth remains relatively low compared to industry peers. McGovern notes that while LegalZoom’s buyback strategy is strong, it may not be sustainable in the long term, as it nearly matches the firm’s estimated free cash flow for 2025. The price objective remains at $8.00, reflecting a valuation slightly below the peer group due to LegalZoom’s lower growth profile, which further supports the Sell rating.

According to TipRanks, McGovern is ranked #2030 out of 9472 analysts.