The Motley Fool has positions in and recommends Microsoft and Zoom Video Communications. Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Zoom Video Communications. As mentioned above, on Sept. 30, 2021, Five9 https://www.wallstreetacademy.net/ 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.
Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein. However, analysts expect Zoom’s adjusted EPS to dip 5% in fiscal 2025 and only rise 1% in fiscal 2026. It might beat those estimates with buybacks throughout the year, but that anemic outlook suggests it’s running out of room to grow.
Yuan then became Cisco’s corporate vice president of engineering for collaboration software. He later formed San Jose, Calif.-based Zoom Video in 2011. A “Zoom Meeting” refers to a videoconferencing session hosted on its cloud infrastructure. Paid Zoom business plans cost $15 or $20 per employee and require minimums of 10 or 50 seats.
- Zoom could fall on its face and grow its earnings at half the pace analysts expect, and the stock’s PEG ratio would still be under 1.
- David Jagielski has no position in any of the stocks mentioned.
- Zoom puts limits on the number of participants in a group call and the length of meetings.
There are currently 2 sell ratings, 10 hold ratings and 5 buy ratings for the stock. The consensus among Wall Street research analysts is that investors should “hold” ZM shares. A hold rating indicates that analysts believe investors should maintain any existing positions they have in ZM, but not buy additional shares or sell existing shares. This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances.
Is Zoom Video A Buy Amid Artificial Intelligence Software Race?
But since Zoom is so profitable and has so much cash, it can financially engineer earnings growth and drive shareholder value. Its 101% net revenue retention rate signals that existing customer spending is stagnant. The company is trying to cross-sell new products that are based on artificial intelligence (AI), and it pointed to some traction in the fourth quarter, calling out some notable logo wins in Broadcom and Diageo.
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. With an end-of-year rally, Zoom stock advanced 6% in 2023. The Nasdaq composite shot up 43% amid buzz over generative artificial intelligence technology. © 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.
Zoom still can’t grow revenue
At its all-time high of $568.34 on Oct. 19, 2020, the stock had traded for 170 times adjusted earnings for fiscal 2021. Today, it trades for about $70, or only 14 times Zoom’s adjusted EPS outlook for fiscal 2025. In fiscal 2023, Zoom’s revenue rose 7% as its adjusted EPS fell 14%.
Yes, the company topped analysts’ revenue expectations by $20 million, but fourth-quarter revenue grew only 3% year over year. And management guided for $4.6 billion in revenue for fiscal year 2025, just 1.6% over fiscal 2024. For fiscal 2025, Zoom said it expects earnings of $4.86 per share at the midpoint of its outlook vs. estimates of $4.66 per share.
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But even though Zoom’s year-over-year revenue growth isn’t soaring, it continues to be positive (see chart below). 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. 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 Video Communications (ZM 0.13%) has given investors some frustration in recent years.
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In fiscal 2021, Zoom’s revenue and adjusted EPS soared 326% and 854%, respectively. In fiscal 2022, its revenue and adjusted EPS grew another 55% and 52%, respectively, even as the pandemic waned. It tried to buy the cloud-based contact center Five9 that year to offset its gradual slowdown, but that deal eventually fell apart. Zoom became synonymous with videoconferencing during the pandemic. Its catchy brand, simple interface, and freemium model made it more accessible than enterprise-oriented competitors like Cisco Systems’ Webex.
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. The company also just authorized a $1.5 billion buyback plan, which is equivalent to about 7% of its outstanding shares and implies the stock is undervalued.
Zoom Stock: Customer Retention Key
Zoom earnings for the quarter ending Jan. 31 were 1.42 per share on an adjusted basis, up 16% from a year earlier. Also, Zoom Video has forged new deals in the enterprise market, such as one with software maker ServiceNow (NOW). Eric Yuan, Zoom’s chief executive and founder, came to the U.S. in 1997. He started out with WebEx Communications and eventually became its vice president of engineering. 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.
Although its long-term prospects are uncertain, given its cheap valuation, Zoom is still a solid stock worth adding to your portfolio. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. That’s why analysts estimate Zoom’s earnings growth could average over 30% annually over the next three to five years.
With the coronavirus emergency long over, the clock is ticking on Zoom Video Communications (ZM). A rebound in revenue growth for Zoom stock depends on its success in the corporate market. And the outlook for ZM stock is tied to whether the company morphs into a broader business communications platform. Zoom Video Communications Inc. (ZM) offers a video-first communications platform used by millions of people worldwide for both business and personal use.
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