Investing in Zoom Stock ZM
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.
If you’re after a new webcam for Zoom video conferencing, or indeed any other kind of video conferencing, these are our top recommendations right now. Quoted prices do not cover additional add-ons – such as webinar facilities, large meetings (up to 1000 participants) and additional cloud recording storage – which will bump up the price. It also supports unlimited one-on-one meetings, screen sharing, chat, virtual backgrounds, whiteboard and more.
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.
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. Zoom has almost no debt, boasting a debt-to-equity ratio of 2% and a strong cash trading strategy guides coupon codes position of $1.3 billion. The company also grew free cash flow by over 1,100% in fiscal year 2021 up to $1.4 billion.
Technicals
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 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.
Zoom Video Communications, Inc.
- Across all Ark Invest funds, Zoom makes up around 4.5% of the company’s holdings.
- 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.
- Investors who expect the remote work trend to continue after the pandemic ends should accumulate some shares of Zoom after its post-earnings drop.
- Its platform helps people to connect through voice, chat, content sharing, and face-to-face video experiences.
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.
Is Zoom Video Communications Stock a Buy?
Across all Ark Invest funds, Zoom makes up around 4.5% of the company’s holdings. As Wood and others have stated, Zoom is much more than an online meeting platform. It is a comprehensive communications ecosystem that includes team chat platforms, online whiteboards, VoIP phone service, workspaces, email, and other services.
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.
Zoom is still generating healthy growth on top of its triple-digit percentage revenue growth last year, but the market’s reaction indicates investors are still worried about its post-pandemic growth. There is one caveat worth mentioning — Zoom’s growth in the coming years is expected to let up significantly from current levels. As the pandemic unwinds and Zoom becomes a more mature company, it’s inevitable that sales growth will come down from its all-time highs. Analysts are forecasting Zoom’s revenue to come in at $7.7 billion in fiscal year 2026, indicating an average annualized growth of 13% from 2022 estimates.
Upcoming earnings
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.
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.
Zoom video conferencing is celebrated for its ease of use, high quality video and audio, and collaboration facilities – and the basic version is also completely free of charge. However, Zoom has rapidly turned into a value stock that returns a respectable level of free-cash-flow growth. If Zoom can start monetizing some of the AI potential Ark Invest sees, it could inspire another bull market in its stock. Ark Invest has backed estimates up by taking a significant position in the media stock. Zoom makes up almost 7% of its flagship fund, the Ark Innovation ETF, making the Cathie Wood investment its fourth-largest holding.
How Zoom’s business could stabilize after the pandemic
With revenue and earnings growth expected to pull back in the years ahead, I wouldn’t be surprised to 17 senior network engineer interview questions and answers climb 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 meetings, chat, rooms and workspaces, phone systems, video webinars, marketplace, and developer platform products. It serves the education, finance, government, and healthcare industries.
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.
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 best stocks for trading options 2020 increase 51% and for its adjusted EPS to rise 42%-43%.
