What Happened?
Shares of online legal service provider LegalZoom (NASDAQ: LZ) fell 2.2% in the afternoon session after the major indices continued to retreat (Nasdaq -1.5%, S&P 500 -1.2%) amid profit-taking and renewed concerns about tariffs.
The decline was not isolated to LegalZoom, as major indices including the S&P 500, Dow Jones Industrial Average, and the tech-heavy Nasdaq all tumbled. Reports indicate the market-wide slump was triggered by a court decision that ruled most of the Trump tariffs illegal. Although the tariffs remain in place pending an appeal, the news has created a risk-off environment, causing a spike in bond yields and market volatility. The tech sector was particularly hard-hit by the negative sentiment, contributing to the downward pressure on many stocks.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy LegalZoom? Access our full analysis report here, it’s free.
What Is The Market Telling Us
LegalZoom’s shares are quite volatile and have had 15 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 25 days ago when the stock gained 42.4% on the news that it received a significant upgrade from Bank of America and posted strong second-quarter financial results that topped Wall Street's expectations.
Bank of America raised its rating on LegalZoom to Buy from Underperform and boosted its price target to $12 from $8, citing the company's successful shift to a subscription-based model and benefits from new AI partnerships. The upgrade followed a strong second-quarter earnings report, where revenue grew 9% year-over-year to $192.5 million, surpassing analyst expectations. This growth was fueled by a 10% increase in subscription revenue. Based on this performance, LegalZoom raised its full-year 2025 revenue growth outlook from a previous 5% to 8%, signaling confidence in its continued momentum.
LegalZoom is up 43% since the beginning of the year, and at $10.81 per share, it is trading close to its 52-week high of $11.18 from August 2025. Investors who bought $1,000 worth of LegalZoom’s shares at the IPO in June 2021 would now be looking at an investment worth $285.62.
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