LegalZoom stock price formed a god candle on Friday after the company published mixed financial results and boosted its forward guidance. The stock had its best day since July last year as it jumped by over 14% and reached its highest point since December 29th. It remains about 63% above its lowest point in 2023.

Strong results and guidance

LegalZoom.com, a company that uses technology to disrupt the legal services industry, had a mixed final quarter of 2024. In a statement, the company said that its total revenue rose by 8% in the last quarter to $159 million. This happened even as its market share dropped by 9.7%.

LegalZoom’s transactional revenue fell by 6% and was offset by a 17% jump in subscription business. Its transaction business includes business formations, intellectual property, tax services, and consumer estate planning. Its total transactions came in at 215k during the quarter.

Subscription business, on the other hand, includes solutions like registered agents, compliance, tax advice and preparation, and accounting and payrolls. Worse, LegalZoom’s margins narrowed during the quarter and the management expects that it will narrow again in the current quarter. 

LegalZoom expects that its revenue will be between $172 million and $176 million. This 5% growth signals that the company is not growing as fast as it did in the past. For the year, the management believes that its revenue will grow to between $700 million and $720 million.

The most important bull case for LegalZoom is that it still has a good market share in the industry and that its subscription business is still growing. The other bullish aspect is that the company has a strong balance sheet with over $226 million in cash and no debt. It is also reducing its share count through buybacks.

However, there are substantial risks for investing in LegalZoom, including its narrowing market share, expected slow growth in its subscription and transaction business, and the overall slowing growth because of macro factors. In the earnings call, the management said:

“​​Based on the trends we are seeing today, we expect low single-digit growth in formations macro in Q1. For the full year, we currently expect flat to low single-digit growth in the formations macro, which translates into some deterioration versus Q1 levels for the remainder of the year.”

LegalZoom stock price forecast

LegalZoom stock

LZ stock chart

The daily chart shows that the LZ share price has moved sideways in the past few months. In this period, the stock has remained between the key support and resistance point at $9.50 and $12.05. It has struggled to move below that support level several times before.

The stock’s volume has risen gradually in the past few days while the stock has moved slightly above the 50-day and 25-day Exponential Moving Averages (EMA). It has also moved to the 50% Fibonacci Retracement level.

Therefore, the outlook for the stock is still bearish since the management expects growth to remain weak this year. More downside will be confirmed if the stock crashes below the key support level at $9.50. If this happens, the stock could drop to the next support at $8.76, its 78.6% retracement point.

By Crispus Kanyaru

With a keen eye for market trends and a knack for translating complex financial concepts into engaging narratives, Crispus has established himself as a trusted voice in the world of finance. His work has graced the pages of esteemed publications like Benzinga, Forbes, Invezz, and Banklesstimes, reaching a diverse audience eager to navigate the ever-evolving financial landscape. Crispus's journey began with a deep curiosity about the forces shaping the global economy. This natural inquisitiveness led them to pursue a degree in finance and CPIA, equipping them with a solid foundation in financial theory and analysis. But Crispus knew that knowledge alone wasn't enough. He craved to bridge the gap between dry data and real-world experiences, to make finance accessible and relatable to everyone.

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