UBS raises LegalZoom.com stock price target to $12 on subscription growth

LegalZoom.com Inc (LZ) received a price target increase from UBS to $12 from $10, while maintaining a Neutral rating, driven by accelerating subscription unit growth which reached 22% in Q2 2025. The company reported Q2 2025 revenue of $192.5 million, exceeding forecasts, though the stock declined aftermarket despite the beat. Separately, BofA Securities upgraded LZ to Buy, citing significant progress in its strategic shift towards subscription-based services and the integration of artificial intelligence collaborations, underscoring the company's evolving business model.

Analysis

LegalZoom.com Inc (LZ) is demonstrating successful execution of its strategic shift to a subscription-based model, evidenced by an acceleration in subscription unit growth to 22% in Q2 2025, up from 20% in Q1 and 14% in Q4 2024. This pivot is supported by the accretive Formation Nation acquisition, which contributed over $12 million in revenue for the quarter. Despite this progress, the company's legacy transactional business remains a headwind, with units declining 5% year-over-year. This mixed performance has led to divergent analyst ratings: UBS raised its price target to $12.00 but maintained a Neutral rating, awaiting more evidence of durable growth, while BofA Securities upgraded the stock to Buy, citing the strategic shift and new AI collaborations. The company's Q2 2025 financial results surpassed revenue expectations at $192.5 million versus a $182.72 million forecast and met EPS estimates, yet the stock declined in aftermarket trading, suggesting investor concern over the transactional weakness or that the recent 25% weekly rally had already priced in the positive news.

Key Decisions for Investors

• Investors should prioritize tracking subscription unit growth and revenue from services like Formation Nation, as these are the primary drivers of the bull thesis and recent analyst upgrades.
• Be cautious of the persistent weakness in the transactional business, as the 5% year-over-year decline is a significant drag that explains UBS's Neutral rating and may continue to temper investor sentiment.
• Given the stock's 25% surge in the past week juxtaposed with a post-earnings decline and split analyst ratings, investors should be prepared for heightened volatility and consider the current valuation in light of both growth drivers and headwinds.
• Monitor for further disclosures regarding the company's AI collaborations, as this initiative, highlighted by BofA, could serve as a future catalyst for margin expansion or product enhancement.