LegalZoom.com Inc. (NASDAQ:LZ) shares rose more than 6% intra-day today after JPMorgan analysts upgraded the stock from Underweight to Overweight, raising the price target to $9.00 from $8.00. The decision reflects growing optimism for the company as it enters 2025, driven by encouraging business formation trends and expectations of stronger profitability guidance.

Business formations, a key indicator of LegalZoom's market potential, showed a positive shift in late 2024. Data from November and December demonstrated resilience on both year-over-year and month-over-month comparisons, marking a reversal from the steep declines that characterized much of the year. This turnaround signals a potential recovery in demand for LegalZoom’s services.

In addition to improving market conditions, LegalZoom’s operational cost reductions from its 2024 restructuring efforts are expected to drive better-than-anticipated profitability in 2025. According to the analysts, the company’s management is likely to guide adjusted EBITDA at a midpoint that exceeds current market expectations by at least 5%. Analysts project a year-over-year EBITDA increase of $15 million for 2025, significantly outpacing the Street's conservative estimate of $8 million.

Given these factors, LegalZoom has been placed on Positive Catalyst Watch ahead of its fourth-quarter earnings release in February.