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. The competition is made up of entrenched incumbents and innovative newcomers.
  2. If it can maintain growth, Zoom will look like a steal in hindsight.
  3. And with positive earnings often comes strong free cash flow.
  4. The Motley Fool has positions in and recommends Microsoft and Zoom Video Communications.
  5. Our experts have selected 5 promising stocks set to climb +100% or (significantly) more within the next 12 months.

The platform connects people via video, phone, chat, and content sharing and can be integrated across a broad range of devices. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. New Rank-Based ScoringMarketRank™ is calculated by averaging available category scores (with extra weight given to analysis and valuation), then ranking the company’s weighted average against that of other companies. Zoom Video reported third quarter earnings that topped estimates but offered mixed guidance for the current period. In the second quarter of last year, Zoom saw sales climb more than 350% and customers with more than 10 users jump over 450%.

Investing in Zoom Stock (ZM)

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.

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.

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.

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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.

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. In July, the company announced it would acquire contact center solutions provider Five9 (FIVN -13.41%).

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.

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The stock’s performance was behind the S&P 500’s daily gain of 0.13%. Elsewhere, the Dow gained 0.13%, while the tech-heavy Nasdaq lost 0.32%. But if sales and profits keep rising, investors looking for cheap stocks should eventually olymp trade broker reviews pick up the baton from those who held shares because sales were growing so fast. Please follow Chung on Twitter at @SaitoChung and @IBD_DChung for more on growth stocks, buy points, breakouts, sell rules and market insight.

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.

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 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.

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.

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.

Why Zoom Video Communications Could Be an Underrated Stock

The company’s fiscal fourth-quarter performance is likely to have benefited from sustained demand for its products, such as Zoom Video Webinars, Zoom Rooms and Zoom Phones. In the fiscal third quarter, customers contributing more than $100,000 in revenues in the trailing 12 months grew 13.5% to 3,731. These customers accounted for 29% of revenues, up from 27% in the year-ago quarter. This might have led to a loss in small and medium-sized business customers, which is likely to have hurt top-line growth.International expansion has been causing cost escalations in the form of development expenses.