Legal tech services provider LegalZoom.com ( LZ ) is having a tough time on Wall Street. It has come under pressure along with other software stocks due to the rise of artificial intelligence (AI). This technology is now recognized as a breakthrough for software companies, with large-scale sales starting with Entropy’s advancements to its cloud-based language model.
However, rather than oppose the rise of AI, LegalZoom has decided to incorporate it into its operations. Last month, the company announced it was integrating its lawyer services into the cloud ecosystem to challenge the traditional billable hourly model. Against this backdrop, there may be a bull case for Legal Zoom stock, as a high street price target of $11 implies a 57.8% upside. Should you buy stocks here?
LegalZoom.com operates an online platform that provides easy-to-use legal technology services for everyday people and small businesses. Users can draft key documents, such as wills, trusts, business arrangements, and IP protection such as trademarks, using self-guided tools, often bypassing the full involvement of a lawyer.
The firm combines smart software, expert guidance, and attorney referrals for affordable solutions on a simple site. Based in Glendale, California, LegalZoom organizes personal and commercial legal services. The company has a market capitalization of $1.22 billion.
Shrinking margins and profitability concerns have led to a decline in the stock price, as LegalZoom faces challenges in fear of disruption from agentic AI technologies. LegalZoom stock is down 31.6% over the past 52 weeks, while it’s down 30% year-to-date (YTD). Just for comparison, the broader S&P 500 Index ($SPX) has gained 15.8% and a little over the same period, respectively. The company’s shares hit a 52-week low of $6.14 on February 24, but are up 13% from that level.
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The sale has made the stock significantly cheaper. On a previously adjusted basis, the price-to-earnings ratio of 9.66x is lower than the industry average of 21.33x.
On February 19, LegalZoom reported its fourth quarter results, which were a mixed bag. The company’s total revenue increased 18% year-over-year (YOY) to $190.27 million, which was higher than the $184.30 million that Wall Street analysts had expected. The average order value for the quarter was 13% higher than a year ago, at $248.
Average revenue per subscription unit (end of period) increased 1% YOY to $266. LegalZoom’s subscription revenue continues to show strong growth, up 20% from the prior year period to $130.95 million. Indeed, the company’s 2025 results reflect an emphasis on participatory initiatives and contributions from Structure Nation acquisitions.
However, LegalZoom’s margins came under pressure. Its Q4 net income margin fell from 8% to 3%. The company’s non-GAAP EPS was $0.17 for the quarter, down 11% YOY and below the $0.18 that analysts were expecting.
For the current year, LegalZoom expects 8% YOY revenue growth (within the guidance range), with a focus on high-value client acquisition and various human in-loop service offerings. However, this represents a step down from the 11% YOY growth seen in 2025.
On the other hand, Wall Street analysts expect LegalZoom’s profits to improve this year. For FY2026, analysts expect the company’s EPS to grow by 285.7% YOY to $0.27, followed by 51.9% expansion to $0.41 in FY2027.
Last month, JP Morgan analyst Ella Smith maintained an “overweight” rating, but lowered her price target to $11 from $14. But, it still remains a high street price target. Just a few days later, analysts at UBS maintained a “neutral” rating on LegalZoom’s stock but cut their price target from $12 to $8, despite the company’s strong Q4 results, four consecutive quarters of accelerating subscription revenue growth. However, the company’s fiscal 2026 revenue growth is expected to slow as improvements in average revenue per user offset the expansion of customer units.
LegalZoom is well-liked on Wall Street, with analysts giving it a consensus “moderate buy” rating. Out of 11 analysts rating the stock, four have given it a “Strong Buy” rating, while six analysts have a middle-of-the-road recommendation with a “Hold” rating, and one has recommended a “Moderate Sell”. The consensus price target of $9.14 represents a 30% upside from current levels. In addition, as mentioned earlier, the street-high JPMorgan-given price target of $11 implies a 56.5% upside.
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Concerns about AI causing a decline in software demand may be a bit overblown. We see that when it comes to LegalZoom, its subscription revenue is growing, and the integration of its lawyer services into the cloud platform indicates that the company is leaning into the AI boom. Therefore, while the stock remains broken, it may be a good time to enter.
As of the date of publication, Anushka Dutta had no position (either directly or indirectly) in any of the secrets mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com
