LegalZoom jumps after BofA upgrades stock on AI boost

Investing.com -- Bank of America raised its rating on LegalZoom to Buy from Underperform on improving subscription trends and new AI partnerships that could help drive growth.

Shares of LegalZoom were up 31% in premarket trading.

The brokerage said LegalZoom has made solid progress in shifting its business toward subscriptions, which now show double-digit revenue growth.

Strong retention and bundling are helping sustain momentum, while higher-value offerings could lift revenue per user over time.

LegalZoom has also teamed up with AI firms like Perplexity and OpenAI. BofA said these deals could help funnel more users to LegalZoom’s platform by addressing the gap between AI-generated answers and actual legal services.

The brokerage believes LegalZoom’s role in delivering legally valid and confidential services positions it well, even as AI becomes more prevalent.

The bank said the long-time risk that AI could undercut LegalZoom’s business is now giving way to the idea that AI can actually expand the market for legal help online. It added that more AI partnerships may follow.

BofA raised its price target to $12 from $8, reflecting higher expectations for earnings and free cash flow. It values the stock at 11 times estimated 2026 EBITDA, a discount to peers due to slower growth, but justified by stronger margins.

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