Is Zoom Video Communications Stock a Buy? The Motley Fool

what is zoom video trading at

Also, 3% revenue growth will probably not inspire growth-oriented investors. Instead of trying to figure out exactly how much Zoom’s revenue growth will decelerate as the pandemic passes, investors should track its expanding operating margins and rising free cash flow. Zoom ended the second quarter with 2,278 customers contributing more than $100,000 in revenue over the past 12 months, which represented 131% growth from a year ago. Its number of customers with more than 10 employees grew 36% year over year to approximately 504,900, while its 12-month net dollar expansion rate among those customers remained above 130% for the 13th straight quarter. Zoom’s operating margins are expanding as its scale improves and its data center capacity rises. Zoom Video Communications Inc. (ZM) offers a video-first communications platform used by millions of people worldwide for both business and personal use.

For that period, the company reported net income of $672.3 million on revenue of $2.7 billion. Zoom is a member of the information technology sector and operates within the software industry. They include legacy web-based meeting service providers such as Cisco Systems Inc.’s (CSCO) WebEx and LogMeIn Inc.’s GoToMeeting. Rivals also include bundled productivity solution providers with video functionality such as Alphabet Inc.’s (GOOGL) Google G Suite and Microsoft Inc.’s (MSFT) Microsoft Teams. Other competitors are unified communications as a service (UCaaS) and legacy private bank exchange (PBX) providers such as 8×8 Inc. (EGHT), Avaya Holdings Corp. (AVYA), and RingCentral Inc. (RNG).

The significant climb in free cash flow was a result of superb revenue growth stemming from pandemic-driven demand. Zoom Video Communications’ (ZM -0.85%) stock price dropped to its lowest levels in over three months after the company released its second-quarter earnings report on Aug. 30. The video conferencing software company beat Wall Street’s estimates on the top and bottom lines, but its guidance for the third quarter slightly missed analysts’ profit expectations and hinted at a post-pandemic slowdown. Zoom’s financials remain strong, but I think the company needs to improve future growth prospects to justify trading at current valuation multiples.

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Wood and her team predicted a $1,500-per-share price target for Zoom by 2026, a 22-fold gain from current levels. In addition to that, I don’t think Zoom is currently trading at an attractive-enough valuation — investors who are still excited about the stock may be wise to wait for looking for a social trading platform find out more at ayondo review here! a larger decline before considering an investment. Still, the bear estimate calls for a $700-per-share or less stock price, amounting to more than a 10-fold gain from current levels if that price target holds. Between the AI tool and its expected growth in hybrid and remote knowledge workers, Ark Invest believes Zoom’s average revenue per user (ARPU) will grow by 26% yearly.

Zoom Video Communications

At the end of fiscal 2021, Zoom predicted its revenue would rise 42%-43% in fiscal 2022, compared to its latest guidance for 51% growth. Therefore, Zoom clearly prefers to temper Wall Street’s expectations instead of raising the bar too high and setting itself up for a big earnings miss. Zoom expects its revenue to rise 31% year over year in the third quarter, which surpasses analysts’ estimates, but for its adjusted EPS to grow just 8%-9%, which misses expectations for 10% growth.

The platform connects people via video, phone, chat, and content sharing and can be integrated across a broad range of devices. The one area of modest strength is non-GAAP (adjusted) free cash flow, which increased almost 14% yearly to more than $1.1 billion in the first three quarters of 2023. That was not enough to persuade investors to buy Zoom stock, as it is up just 1% from year-ago levels. Admittedly, the company’s results have come nowhere close to matching that expected growth. In the first nine months of 2023, revenue of $3.4 billion increased by only 3% yearly.

Investing in Zoom Stock (ZM)

The Motley Fool has positions in and recommends Bitcoin, Tesla, and Zoom Video Communications. Zoom Video Communications (ZM -0.85%) is a bit of a mystery as a growth stock. The U.S. government has been increasing its scrutiny of Zoom on several fronts. In 2020, the United States charged a China-based Zoom executive with conspiring to disrupt videoconference commemorations of the 1989 Tiananmen Square democracy protests.

Zoom is also the focus of several ongoing federal investigations related to its dealings with Beijing, according to the Journal. Meetings on the platform can host as many as 1,000 participants, while webinars can scale up to as many as 50,000. Don’t let Zoom’s past success dictate your decision to invest in the company today. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors.

what is zoom video trading at

Double-digit revenue growth for the next five years surely isn’t bad, but it doesn’t compare to the company’s 160% compound annual growth rate over the past three years. On the earnings front, Wall Street analysts are forecasting an average annualized growth of 28% over the next five years up to an earnings per share of $6.21 per share in fiscal year 2026. This is more favorable than Zoom’s expected top-line scenario, but many investors still might be hesitant to pay a lofty valuation for the company when taking into account the deceleration in growth. I believe Zoom still has room to grow since it clearly disrupted a fragmented market filled with mature and complacent players. Investors who expect the remote work trend to continue after the pandemic ends should accumulate some shares of Zoom after its post-earnings drop. However, the stock is still pricey and will remain volatile — so it isn’t an ideal investment for queasy investors.

  1. As a long-term investor, I don’t ignore past performance, but I’m generally more interested in where the company is heading.
  2. The Motley Fool has positions in and recommends Bitcoin, Tesla, and Zoom Video Communications.
  3. The video conferencing software company’s stock tumbled after its latest earnings report.
  4. If you don’t mind the hassle of dialling back in, the host can simply start another call.

Prior to founding Zoom, Yuan was corporate vice president of engineering at Cisco, and was a founding engineer and vice president of engineering for web and videoconferencing platform Webex. As mentioned above, on Sept. 30, 2021, Five9 announced that the two parties had mutually agreed to abandon the deal. The company said that the agreement had not received the required number of votes from Five9 shareholders to approve the merger. Department of Justice-led panel, named Team Telecom, was investigating the proposed merger’s potential national security risks. Zoom’s latest fiscal year (FY) was FY 2021, which ended Jan. 31, 2021.

Still, operating income fell during that period, and much of the gain came from $114 million in “other income,” which consists of usgfx review 2021 user ratings bonus demo & more income from interest, foreign currency, and marketable securities. Unfortunately for Zoom bulls, that “increase” is likely a one-time event. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.

Leo Sun owns shares of Cisco Systems and Zoom Video Communications. The Motley Fool owns shares of and recommends Five9, Microsoft, and Zoom Video Communications. Those strategies could help Zoom shake off its reputation as a one-trick pony and support its long-term evolution into a cloud-based communications giant. As of Aug. 23, 2021, Zoom had 240,744,533 outstanding shares of Class A common stock and 56,383,369 outstanding shares of Class B common stock. The company is headquartered in San Jose, Calif., and has additional offices in more than 15 locations in the United States, Europe, Asia, and Australia.

With growth expected to hit the breaks in the years ahead, the company will likely become currency appreciation and depreciation calculator less attractive to investors who bought into Zoom’s growth story. Given the state of the company, investors should consider Zoom stock. Admittedly, investors like Ark Invest may have to adjust their expectations. With 2026 just two years away, Ark Invest’s base case estimates are looking increasingly unlikely to come to pass, and it may even fall short of the $700-per-share bear case estimate.

The video conferencing software company’s stock tumbled after its latest earnings report. Free Zoom offers video conferencing for up to 100 participants, provided the meeting runs for no longer than 40 minutes, at which point attendees are ejected from the conference. If you don’t mind the hassle of dialling back in, the host can simply start another call.

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