What Happened?
Shares of online legal service provider LegalZoom (NASDAQ: LZ) jumped 42.4% in the morning session after it received a significant upgrade from Bank of America and posted strong second-quarter financial results that topped Wall Street's expectations. Bank of America raised its rating on LegalZoom to Buy from Underperform and boosted its price target to $12 from $8, citing the company's successful shift to a subscription-based model and benefits from new AI partnerships. The upgrade followed a strong second-quarter earnings report, where revenue grew 9% year-over-year to $192.5 million, surpassing analyst expectations. This growth was fueled by a 10% increase in subscription revenue. Based on this performance, LegalZoom raised its full-year 2025 revenue growth outlook from a previous 5% to 8%, signaling confidence in its continued momentum.
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What Is The Market Telling Us
LegalZoom’s shares are somewhat volatile and have had 14 moves greater than 5% over the last year. But moves this big are rare even for LegalZoom and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock gained 27.1% on the news that the company reported strong first quarter 2025 results which beat analysts' revenue, EPS, and EBITDA expectations, and also saw subscription units outperform Wall Street's estimates. Transaction revenue, by contrast, was flat, held back by a drop in business formations and softer average order values. Overall, we think this was a solid quarter with some key metrics above expectations.
LegalZoom is up 50% since the beginning of the year, and at $11.34 per share, has set a new 52-week high. Investors who bought $1,000 worth of LegalZoom’s shares at the IPO in June 2021 would now be looking at an investment worth $299.62.
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