Small Cap Vertical Software Tailwinds, Catalysts, and Structural Overhangs for LZ, PAR, and ALRM

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Small Cap Vertical Software Tailwinds, Catalysts, and Structural Overhangs for LZ, PAR, and ALRM

Ella Smith AC North America Equity Research

(1-212) 622-2451 24 June 2026 J P M O R G A N

ella.smith@jpmchase.com

Investment Thesis, Valuation and Risks

LegalZoom (Overweight; Price Target: $8.00)

Investment Thesis

We rate LegalZoom Overweight. Individuals can quickly register LLCs, non-profits, and

other corporate structures on LegalZoom. LegalZoom’s objective is to cross-attach higher-

value, subscription products to lower-value business formation and transactional products,

as well as improve the overall gross retention of its customers (~>60%). We acknowledge

heavy competition in the space, requiring hefty S&M and R&D investments to sustain

market share. The heavy competition of the space also limits pricing power across

LegalZoom’s product suite. LegalZoom appears to be undergoing a cultural and business

transformation, which supports longer-term earnings expectations, multiple expansion, and

ultimately the attractiveness of the shares at these levels.

Valuation

$8/sh implies a 4x EV/EBITDA multiple for 2027E. Our price target multiple is at the

lower-end of the range versus where our coverage universe currently trades. We believe this

is justified due to LZ’s poorer retention qualities and relatively higher SBC profile. We

believe LZ shares are attractive at these levels due to AI tailwinds from new product

launches, as well as an accelerating business formation environment.

Risks to Rating and Price Target

Downside: LegalZoom could fail to meaningfully increase its subscription-to-

transaction mix as well as the gross retention of its subscription products. We view the

increasing mix between subscription-and-transaction revenue to be favorable to

LegalZoom.