Zoom Stock: Is It A Buy Right Now? Here’s What Earnings, ZM Stock Chart Show Investor’s Business Daily

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The Morgan Stanley analyst believes enterprise momentum and dissipating margin headwinds create a positive setup for the stock ahead of earnings. Clearly, Zoom customers are eager to adopt the new functionalities, adding to Zoom’s value per customer, which can become a strong growth driver over time, especially if it continues to struggle to add new customers. With this software being used by millions of individuals, governments, institutions, and businesses worldwide, this gives Microsoft a very powerful advantage, one Zoom can’t fight or match. Apart from the first-mover advantage and the fact that enterprises are unlikely to switch platforms due to costs, Zoom has had very little going for it. The platform is in no way unique, which is confirmed by Gartner’s research, which gives both Zoom and Microsoft Teams very similar ratings and places on its magic quadrant. Whereas Zoom offered the best platform during the pandemic thanks to its head start, focusing on simplicity and meeting features, competition has caught up, with Microsoft’s Teams platform offering very similar features to that of Zoom.

  1. Management further guides for an operating margin of around 36.5%, up 30 basis points YoY.
  2. For the current quarter, Zoom predicted adjusted earnings of $1.14 a share on sales of $1.13 billion.
  3. The company said that the agreement had not received the required number of votes from Five9 shareholders to approve the merger.
  4. Furthermore, whereas Zoom operated the best platform during the pandemic, focusing on simplicity and meeting features, competition has caught up, resulting in a weakening moat for Zoom.
  5. Zoom Phone, a cloud-calling product rolled out in 2019, lets customers set up group internet phone calls without video.

And the outlook for ZM stock is tied to whether the company morphs into a broader business communications platform. 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. With growth expected to hit the breaks in the years ahead, the company will likely become less attractive to investors who bought into Zoom’s growth story. The second stage is also known as Terminal Value, this is the business’s cash flow after the first stage.

The emergence of formidable competitors, particularly Microsoft Teams (MSFT), equipped with advanced AI capabilities and seamless integration, has eroded Zoom’s once-dominant position. While a commendable effort, the company’s attempts to enter the productivity market with Zoom Docs may face challenges against established players like Microsoft Office and Google Docs (GOOG) (GOOGL). Zoom is a member of the information technology sector and operates within the software industry.

The Model

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. Earlier in September, The Wall Street Journal reported that a U.S. Department of Justice-led panel, named Team Telecom, was investigating the proposed merger’s potential national security risks. 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.

But our job is to deploy capital, and to do so selectively, only when we believe that the stock offers investors a very compelling risk-reward. Lately, Zoom has been adding more productivity and artificial intelligence tools to its business communications platform. Zoom closed its fiscal third quarter with 219,700 enterprise customers, up 5% from the same period last year. 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. Zoom Video is set to announce its second-quarter fiscal 2022 financial results after the market closes on Aug. 30.

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. In light of revenue variation of popular Peter Lynch’s earnings line for the projection of probable per share values of the company, I see Zoom Video’s IPO as very attractive. If the company’s shares get bought at 5x price-to-sales ratio and stay at that figure, the company’s long-run annualized return potential could be as much as 70 percent. Should the IPO price-to-sales ratio originally stand at 5x and over the course of the next three years fall to 1x, the company’s upside potential would evaporate.

Investment thesis

The company aims to leverage AI technologies for optimization and improvements in user experience but recognizes the ongoing need for investment in this domain. Since I made those comments, the stock has practically nowhere, and has substantially underperformed the S&P500. Further, as I look ahead to the next twelve months, I https://bigbostrade.com/ maintain that this stock is fair valued. 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. Since its breakout past a 93.40 buy point in a canyonlike cup with handle, not only has the stock climbed 194%.

Zoom Video Communications Inc.

This increase was driven by stronger collections, targeted expense management, and higher interest income. This allowed Zoom to further strengthen the balance sheet as it ended Q3 with a total cash position of $6.5 billion, up a little over a billion from the start of the year. Meanwhile, the company has no debt on the balance sheet, leaving it in excellent financial health with plenty of cash to invest or use for acquisitions.

We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second ‘steady growth’ period. In the first stage we need to estimate the cash flows to the business over the next ten years.

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. © 2024 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions. Information is provided ‘as-is’ and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see Barchart’s disclaimer. Upgrade to MarketBeat All Access to add more stocks to your watchlist.

Yes, Microsoft’s Teams platforms seem to be growing slightly faster, but Zoom’s market share losses seem to be less significant than I anticipated eight months ago. In addition, management is able to improve margins and cash flows even as revenue growth keeps slowing down, which is remarkable. Furthermore, whereas Zoom operated the best platform during the pandemic, focusing on simplicity and meeting features, competition has caught up, resulting in a weakening moat for Zoom. Zoom Video Communications, forex market hours Inc. provides unified communications platform in the Americas, the Asia Pacific, Europe, the Middle East, and Africa. It serves individuals; and education, entertainment/media, enterprise infrastructure, finance, government, healthcare, manufacturing, non-profit/not for profit and social impact, retail/consumer products, and software/Internet industries. The company was formerly known as Zoom Communications, Inc. and changed its name to Zoom Video Communications, Inc. in May 2012.

The pandemic party is well and truly over for Zoom it seems after a mixed bag of earnings was topped off with a gloomy outlook. The company’s AI companion, which is now available to paying users at no additional cost, is a differentiator to other AI assistants, with those of Microsoft and Google, both costing up to $30 per month. As a result, the AI functionalities have seen great adoption in the first three months since the release, with over 200,000 accounts enabling it and 2.8 million meeting summaries having been created by the assistant. Zoom has invested in AI start-up Anthropic in an effort to boost its AI offerings. The company is leveraging Anthropic’s large language model, known as Claude, across its platform, including its call center and the company’s AI companion.

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