Zoom Stock Price and Chart NASDAQ:ZM
Attendees can join a Zoom meeting without even signing into the app, but must register for an account to host a video meeting. Premium versions support Zoom meetings with up to 1,000 participants, call recording, unlimited phone calls and much more. Zoom’s valuation has surely contracted, but it’s still not desirable when observing the company’s peer group. Given the expected slowdown in Zoom’s growth, I think it’s safe to say that the company is still trading at expensive valuation multiples. Zoom even initiated new growth efforts, building out an artificial intelligence (AI)-driven communications ecosystem. Then there is the endorsement of Ark Investment Management’s CEO Cathie Wood, whose bold predictions regarding other tech stocks (like Tesla and Bitcoin) have come to pass.
A history of conservative guidance
Zoom’s margins should either remain stable or expand in a post-pandemic market, since many of its new users during the pandemic stayed on free plans instead of upgrading to paid tiers. Zoom’s growth will inevitably decelerate in a post-pandemic world, but investors should still note how often it „sandbags“ its guidance. During that period, its net income of $339 million surged 63% higher.
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.
Zoom Video Communications
While the word Zoom is used by some as a byword for video conference, there are many Zoom alternatives on the market capable of rivalling the big name brand. The most basic paid version costs $149.90/£119.90/AU$209.90 per year when billed annually or $14.99/£11.99/AU$20.99 per month, which is a little more expensive in the long-run. Video conferencing platform Zoom has become a household name after enjoying a breakout year, in large part due to the pandemic and rise of remote working. Zoom Video Communications (ZM -0.85%) rewarded shareholders who bought the stock prior to the pandemic, returning 391% in 2020. The company was a clear beneficiary of the work-from-home environment, a trend that is still very evident today. Bureau of Labor statistics released in January, 11% of workers were still teleworking as of December 2021.
Is Zoom Video Communications Stock a Buy?
Its platform helps people to connect through voice, chat, content sharing, and face-to-face video experiences. The company was founded by Eric S. Yuan in 2011 and is headquartered in San Jose, CA. Its forward price-to-earnings (P/E) ratio is just under 14, and the price-to-sales (P/S) ratio of less than 5 is just above all-time lows. That valuation positions the stock for a massive surge if the company can stoke a recovery in revenue growth.
How Zoom’s business could stabilize after the pandemic
Zoom is available free of charge to anyone and the basic free version offers all the facilities most people will need. The Zoom app is available on all major desktop and mobile operating systems, including Windows, macOS, Android and iOS. It’s used primarily by businesses to host meetings with remote colleagues and clients, but Zoom is an equally useful tool for keeping in touch with friends and family. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Luke Meindl has no position in any of the companies mentioned.The Motley Fool owns and recommends Alphabet (A shares), Cisco Systems, Microsoft, and Zoom Video Communications. For the full year, Zoom expects its revenue to increase 51% and for its adjusted EPS to rise 42%-43%.
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 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.
As a long-term investor, I don’t ignore past performance, but I’m generally more interested in where the company is heading. Zoom has provided investors with spectacular growth and returns in the past couple of years; however, I don’t see that continuing into the future. The pullback in pandemic-driven demand, in addition to increased competition from massive tech companies like Microsoft and Alphabet, will challenge Zoom’s business moving from here on out.
Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The Motley Fool reaches millions of people every the next amazon stock is already here month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation. Zoom shares have lost over 60% of their value in the past six months as part of a broader tech sell-off in response to rising interest rates and inflation.
- Premium versions support Zoom meetings with up to 1,000 participants, call recording, unlimited phone calls and much more.
- Revenue and earnings growth remain strong — analysts are forecasting revenue and earnings per share to grow by 54% and 46% year over year up to $4.1 billion and $4.87 per share in fiscal year 2022, respectively.
- Wood and her team predicted a $1,500-per-share price target for Zoom by 2026, a 22-fold gain from current levels.
- The company also grew free cash flow by over 1,100% in fiscal year 2021 up to $1.4 billion.
- Zoom shares have lost over 60% of their value in the past six months as part of a broader tech sell-off in response to rising interest rates and inflation.
With revenue and earnings growth expected to pull back in the years ahead, I wouldn’t be surprised to see growth-oriented investors exit their positions in Zoom stock. The slowdown in growth, combined with ongoing macroeconomic headwinds and geopolitical concerns, will put additional downward pressure on Zoom’s valuation for the foreseeable future. Zoom Video Communications, Inc. engages in the provision of video-first communications platform. The firm offers Oil future markets meetings, chat, rooms and workspaces, phone systems, video webinars, marketplace, and developer platform products. It serves the education, finance, government, and healthcare industries.
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.
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.
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 czech koruna exchange rate 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).
And yet the business performed solidly throughout the past few years even as the stock fell. Zoom’s revenue rose 54% year over year to $1.02 billion during the second quarter and beat estimates by nearly $30 million. Its adjusted net income increased 51% to $415 million, or $1.36 per share, which cleared expectations by $0.20. Should investors buy Zoom’s dip, or should they avoid it as more people physically return to work and school? Let’s examine Zoom’s growth rates, future plans, and valuations to find out.