ZM Stock Price Zoom Video Communications Inc Stock Quote U.S.: Nasdaq

That would even further depress the above ratios despite Zoom growing sales 51% and profits 43% year over year. If it can maintain growth, Zoom will look like a steal in hindsight. Zoom Video Communications (ZM) late Monday beat expectations for its fiscal third quarter, but offered mixed guidance for the current period. 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.

Given the company’s actual performance over that time, it appears overly punitive for Zoom stock to fall to pre-pandemic levels. Here’s why this stock is a no-brainer buy at the valuation it’s trading for. Zoom’s latest fiscal year (FY) was FY 2021, which ended Jan. 31, 2021.

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2. It also adds the $24 billion contact center opportunity to its addressable market.
3. 18 Wall Street equities research analysts have issued «buy,» «hold,» and «sell» ratings for Zoom Video Communications in the last twelve months.
4. For its part, Five9 has posted sales of about $500 million over the last 12 months.

Lately, Zoom has been adding more productivity and artificial intelligence tools to its business communications platform. 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. 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. Management has already indicated that it is not planning to leverage its significant cash position to buy back shares.

MarketWatch

Growth in annual recurring revenue for business customers with contracts topping $100,000 is one metric to monitor. Zoom Video Communications ZM closed the latest trading day at $63.90, indicating a +0.03% change from the previous session’s end. The stock trailed the S&P 500, which registered a daily gain of 0.06%.

Including SBC, the company can still barely report a profit with a GAAP net income margin of just 10%, which raises concerns. Nevertheless, Zoom https://g-markets.net/ reported a 5% growth in Enterprise customers in Q3. Enterprise now accounted for 58% of revenue, up from 56% in the same quarter last year.

Also, Zoom morphed into a social phenomenon as making video calls became routine for consumers to keep in touch with family and friends. Remote learning and needs in telemedicine also boosted demand for Zoom Video’s cloud-based services. At its annual Zoomtopia user conference in early October, the company said it will not charge customers for use of its AI Companion. Its capabilities include meeting/chat summaries and smart recordings. Zoom still expects the deal to close in the first half of next year. It’s just another potential speed bump as Zoom tries to keep expanding beyond its role during the pandemic.

Should I Buy Zoom Video Communications Stock? ZM Pros and Cons Explained

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. Even if I maintain my 15x fair value multiple, the slightly higher EPS expectations only allow for a minor target price increase to $73 per share, based on my FY25 EPS projection. This leaves pretty much no upside potential over the next 12+ months, which is why I reconfirm my sell rating on Zoom, despite some positive developments and outlook upgrades.

Is It Time To Sell Zoom Video Stock? What The P-E Ratio Says Today

Meanwhile, the Dow experienced a rise of 0.13%, and the technology-dominated Nasdaq saw an increase of 0.24%. For its part, Five9 has posted sales of about $500 million over the last 12 months. The competition is made up of entrenched incumbents and innovative newcomers. Over the last 12 months, Zoom Video Communications’s shares have ranged in value from as little as $58.87 up to $80.8.

Also, Zoom Video has forged new deals in the enterprise market, such as one with software maker ServiceNow (NOW). Yuan then became Cisco’s corporate vice president of engineering for collaboration software. A «Zoom Meeting» refers to a videoconferencing session hosted on its cloud infrastructure. ascending triangle pattern Paid Zoom business plans cost $15 or $20 per employee and require minimums of 10 or 50 seats. Sales growth slowed for the ninth-straight quarter as the company adjusts to slower product demand in the post-coronavirus emergency era. Analysts have debated when decelerating sales will hit a bottom.

As discussed earlier, the outlook for the videoconferencing industry is very solid, with growth at a CAGR of low-double digits. Yet, I did not expect Zoom to be able to fully benefit from this growth. I still don’t, which is essentially a result of the significant competition it faces from Microsoft with its Teams platform, Zoom’s weak moat, and its financial disadvantage. As Zoom’s revenue growth slowed, the company saw its margins shrink and eventually its bottom line fell into the red. But as the company cut costs and worked on efficiencies, it returned to profitability, reporting positive earnings in each of its three most recent quarters. A decline in Zoom’s value shouldn’t have come as a huge surprise to investors given that a return to normal would mean less of a need for video-based communications.

Still, this is better than I anticipated, primarily due to the business showing to be stickier than expected and management’s rollout of new features, adding new revenue streams. These new integrations are crucial for Zoom as these next-generation technologies are crucial in winning over customers and maintaining them. As a result of these dynamics, the global videoconferencing market, from a stable level in 2023, is expected to grow at a CAGR of low-double digits.

At present, Zoom Video Communications boasts a Zacks Rank of #3 (Hold). Coming into today, shares of the video-conferencing company had lost 6.31% in the past month. In that same time, the Computer and Technology sector gained 12.39%, while the S&P 500 gained 6.45%. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading.

Is it a good time to buy Zoom Video Communications stock?

The company has outperformed my expectations in terms of development, allowing for some careful optimism in my eyes. However, I do still expect a slight market underperformance from Zoom. Furthermore, despite my overall negative view so far, Zoom has also positively surprised me over the last eight months in terms of feature developments and the integration of AI functionalities in particular. In my April article, I explained how I expected Zoom to fall behind the competition on this front as it has to compete with big tech peers like Cisco and Microsoft with superior financial resources and much more experience in AI. And yet, Zoom has proven me wrong over these last few months, with the company rapidly rolling out new features and beating Microsoft and Cisco to the feat.

Zoom Video Communications, Inc.

For the October quarter, Zoom Video earned an adjusted $1.29 a share, up 21% from a year earlier. Zoom Video has built up alliances with the likes of Salesforce.com (CRM), Atlassian (TEAM) and Box (BOX). Salesforce.com invested in Zoom stock prior to its initial public offering and reaped big gains. Zoom Video in early March said company President Greg Tomb, a former cloud computing executive at Alphabet’s (GOOGL) Google, will leave.

While I am in favor of this strategy on many occasions, I am not sure in this situation as it leaves investors highly exposed to the significant levels of SBC. Furthermore, as a result, GAAP EPS remained much lower at just $0.45, indicating that SBC continues to take up 66% of non-GAAP net income, which is significant. YTD, this increases further to 70% of non-GAAP net income, with SBC of $813 million. Overall, SBC will be down slightly from fiscal FY23 levels but remain elevated. Growth so far in 2023 had turned out much better than what management had guided for at the start of the year when it had guided growth of just 1%. In Q3, total revenue came in at $1.14 billion, up 3% year-over-year, bringing the YTD growth to 3.2%, a slowdown from the 7% growth reported in its fiscal FY23.

Microsoft Office and Google Docs have very strong user bases with great compatibility and accessibility with other apps and platforms of those companies. The Motley Fool has positions in and recommends Microsoft and Zoom Video Communications. 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. Don’t forget to use Zacks.com to keep track of all these stock-moving metrics, and others, in the upcoming trading sessions.