Zoom Video Communications, Inc. provides unified communications platform in the Americas, the Asia Pacific, Europe, the Middle East, and Africa. The company was formerly known as Zoom Communications, Inc. and changed its name to Zoom Video Communications, Inc. in May 2012. The company was incorporated in 2011 and is headquartered in San Jose, California. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer.

These returns cover a period from January 1, 1988 through October 7, 2024. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return.

Zacks Research is Reported On:

If Zoom can start monetizing some of the AI potential Ark Invest sees, it could inspire another bull market in its stock. Still, the bear estimate calls for a $700-per-share or less stock price, amounting to more than a 10-fold gain from current levels if that price target holds. 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. 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.

Cash flow

The company is forecasted to report an EPS of $1.31, showcasing a 1.55% upward movement from the corresponding quarter of the prior year. Alongside, our most recent consensus estimate is anticipating revenue of $1.16 billion, indicating a 2.34% upward movement from the same quarter last year. Given the state of the company, investors should consider Zoom stock. Admittedly, investors like Ark Invest may have to adjust their expectations. With 2026 just two years away, Ark Invest’s base case estimates are looking increasingly unlikely to come to pass, and it may even fall short of the $700-per-share bear case estimate. Also, 3% revenue growth will probably not inspire growth-oriented investors.

The pullback in Beyond Technical Analysis 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. 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. Zoom is a member of the information technology sector and operates within the software industry.

In order to do this, businesses need the cash to invest in research and development and capital improvements. Zoom has the How to buy crypto with credit card balance sheet to do this and has been very active in rolling out new products. By taking out of the equation the volatility of the past two years and viewing Zoom’s performance on this two-year basis, we see just how remarkable the growth of its business is.

About Zoom Video Communications, Inc.

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. 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 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.

ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities. For a company like Zoom that has been so tied in investors’ minds to the pandemic, it can be difficult to take a beaxy review step back and see the forest for the trees. Taken without the noise of the past two years, Zoom is clearly a buy for existing shareholders or those investors looking to start a position.

1. Zoom Video Communications (ZM 5.76%) rewarded shareholders who bought the stock prior to the pandemic, returning 391% in 2020.
2. Zoom is set to report third-quarter results on Monday after the bell.
3. The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988.
4. The chart below compares Zoom’s Q3 of 2022 (ending Oct. 31, 2021) to the corresponding quarter two years ago.
5. Admittedly, the company’s results have come nowhere close to matching that expected growth.
6. Ark Invest has backed estimates up by taking a significant position in the media stock.

Our experts picked 7 Zacks Rank #1 Strong Buy stocks with the best chance to skyrocket within the next days. Don’t let Zoom’s past success dictate your decision to invest in the company today. Zoom’s management also views international expansion as an important opportunity. Continuing the two-year comparisons, that number is up from Q3 2020, when international revenue was only 20% of total revenue. If Zoom can continue to grow internationally, it opens up plenty of new revenue opportunities.

Keep in mind that stocks can be volatile in the aftermath of earnings announcements. The company maintains a strong balance sheet and generates significant cash flow. Zoom is set to report third-quarter results on Monday after the bell. The Zacks Consensus Estimate calls for earnings of $1.31 per share, reflecting a 1.6% improvement relative to the same quarter last year. Sales are anticipated to have risen 2.34% to $1.16 billion during the third quarter.

Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations. Zacks may license the Zacks Mutual Fund rating provided herein to third parties, including but not limited to the issuer. Zoom’s financials remain strong, but I think the company needs to improve future growth prospects to justify trading at current valuation multiples.