Is Zoom Video Communications, Inc NASDAQ:ZM Trading At A 30% Discount?

The second stage is also known as Terminal Value, this is the business’s cash flow after the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.1%. We discount the terminal cash flows to today’s value at a cost of equity of 8.0%. 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, top-rated podcasts, and non-profit The Motley Fool Foundation.

As of January 31st, there was short interest totaling 13,270,000 shares, an increase of 6.4% from the January 15th total of 12,470,000 shares. Based on an average daily trading volume, of 3,870,000 shares, the days-to-cover ratio is currently 3.4 days. Zoom’s cloud-based software sets up video calls, with chat tools available. Zoom Video is racing to build more artificial intelligence tools into its business communications platform. Zoom Video recently backed off from a change in its terms of service for platform users that would have enabled it to gather data to train AI models. Management has projected revenue of more than $4 billion and earnings of $4.77 per share this fiscal year.

In July 2021, Zoom Video and Five9 (FIVN), which automates call center services, announced a deal to merge. The all-stock deal was originally valued at $14.7 billion. In the business market, Zoom rivals include RingCentral (RNG), Cisco Systems (CSCO), Google and others. Growth in annual recurring revenue for business customers with contracts topping $100,000 is one metric to monitor. Microsoft (MSFT) and its Teams communications tools are Zoom’s major rival in the business market.

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.

Our research shows that these estimate changes are directly correlated with near-term stock prices. This model considers these estimate changes and provides a simple, actionable rating system. Zoom Video Communications (ZM) closed the most recent trading day at $61.35, moving +0.05% from the previous trading session. As mentioned above, on Sept. 30, 2021, Five9 announced that the two parties had mutually agreed to abandon the deal.

In May, Zoom announced an investment in AI startup Anthropic to support research roadmaps. Anthropic’s AI model will be integrated into Zoom’s Contact Center platform. One, watch for a big drop through the 10-week moving average. Right now, Zoom’s average weekly turnover over the past 10 weeks is nearly 56 million shares — more than a quarter of the stock’s 180-million-share float. Over the same time frame, O’Neil notes, the Dow Jones Industrial Average showed an average ratio of 15 times trailing 12-month earnings.

  1. Zoom closed its fiscal third quarter with 219,700 enterprise customers, up 5% from the same period last year.
  2. Our research shows that these estimate changes are directly correlated with near-term stock prices.
  3. In July, the company announced it would acquire contact center solutions provider Five9 (FIVN -13.41%).
  4. Please log in to your account or sign up in order to add this asset to your watchlist.

The Morgan Stanley analyst believes enterprise momentum and dissipating margin headwinds create a positive setup for the stock ahead of earnings. The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

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. Another new development that might impact the deal is the fact that it is being reviewed by a committee chaired by Attorney General Merrick Garland.

Zoom Video (ZM) to Report Q4 Earnings: What’s in the Cards?

ZM stock holds an Accumulation/Distribution Rating of B-minus. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. Its current rating indicates more funds are buying than selling. Analysts polled by FactSet had expected Zoom earnings of $1.09 a share on sales of $1.12 billion. Zoom Video Communications ZM closed the most recent trading day at $61.35, moving +0.05% from the previous trading session.

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Upgrade to MarketBeat All Access to add more stocks to your watchlist. 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 (CRM), Atlassian (TEAM) and Box (BOX). invested in Zoom stock prior to its initial public offering and reaped big gains.

You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities. At a discounted price, the stock can make for a great buy; there’s no reason it should be trading near the levels it was at in 2019.

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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. After spending much of 2020 at or near an all-time high, shares started dropping in the fall of last year. It’s pushed the price-to-sales and price-to-earnings ratios to all-time lows.

Although it’s not at the same levels as a few years ago, that growth rate was unsustainable to begin with. The fact that revenue hasn’t fallen drastically is a testament to the strength and popularity of Zoom’s service. Investors should also note any recent changes to analyst estimates for Zoom Video Communications. These revisions help to show the ever-changing nature of near-term business trends.

Research and Development expenses jumped 2% year over year to $105.7 million in the third quarter of fiscal 2024. This trend is likely to have continued in the fiscal fourth quarter as the company plans broker olymp trade to add local sales support in international markets. Zoom Video Communications, Inc. provides unified communications platform in the Americas, the Asia Pacific, Europe, the Middle East, and Africa.

That said, posting growth will be a lot harder now that Zoom is lapping the pandemic-fueled 2020. 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. Now that growth is coming back to earth, the stock has fallen 51% from its high last year. Despite that, there are several good reasons to think Zoom could stage a rebound. In the meantime, these key sell rules may help you take at least some profits close to the peak of this current rally.

Paid Zoom business plans cost $15 or $20 per employee and require minimums of 10 or 50 seats. As the coronavirus crisis eases, retaining small businesses as well as corporate accounts will be one key to Zoom’s success. For customers with one to 10 employees, renewals are expected to slow as the economy reopens and shelter-in-place orders lift.

Our experts have selected 5 promising stocks set to climb +100% or (significantly) more within the next 12 months. Zoom’s stock is trading at only 14 times its estimated future profits. Its product is proving to be resilient, even amid growing competition. By accumulating free cash, Zoom can put it to work and potentially pursue acquisitions and growth opportunities. It’s when a business is not growing and not generating free cash that investors should be worried.

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