BofA sees LegalZoom’s strategic shift toward subscriptions and AI partnerships as key drivers of long-term value
LegalZoom (LZ) shares jumped 31% in premarket trading after Bank of America upgraded the company’s stock rating from Underperform to Buy, citing improving fundamentals and a promising new direction driven by artificial intelligence (AI).
According to BofA, LegalZoom has made significant progress in transforming its business model from transactional services to subscription-based offerings. This shift is yielding double-digit revenue growth, boosted by strong customer retention, service bundling, and the introduction of higher-value options that enhance revenue per user.
Another major factor in the upgrade is LegalZoom’s recent collaboration with AI leaders such as Perplexity and OpenAI. These partnerships are designed to bridge the gap between AI-generated legal queries and actual, legally binding services—potentially expanding LegalZoom’s user base.
Rather than being disrupted by AI, LegalZoom is now being viewed as well-positioned to thrive in an AI-driven environment. BofA noted that while AI was once considered a competitive threat, it may now act as a market-expanding catalyst by driving more consumers toward trusted, human-reviewed legal solutions.
Reflecting this optimism, Bank of America raised its price target for LegalZoom stock from $8 to $12. While the firm acknowledges that LegalZoom trades at a discount to its peers due to slower top-line growth, it believes the company’s stronger profit margins and free cash flow potential justify the valuation.
Overall, the brokerage sees LegalZoom’s blend of AI integration and a robust subscription model as a winning formula in the evolving legal tech landscape.
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