//Zoom Video Communications ZM Increases Yet Falls Behind Market: What Investors Need to Know

Zoom Video Communications ZM Increases Yet Falls Behind Market: What Investors Need to Know

Rather than increase revenue, Zoom Video expects gen AI tools to retain and add customers. The company went public on April 18, 2019, with the stock closing up 72% from the opening bid and trading at $62. The company raised $752 million from its initial public offering, according to Investor’s Business Daily. Many of the offers appearing on this site are from advertisers from which this website receives compensation for being listed here.

The success of virtual events, exhibitions, and conferences during the pandemic has opened up new opportunities for businesses. Even as physical events return, the videoconferencing market is expected to see continued growth in the virtual events space. Due to the huge increase in remote work during the COVID-19 pandemic, the use of Zoom exponentially increased during 2020 and in the months and years after.

Those three regions account for a combined 16% of total revenue. Zoom’s stock is trading at only 14 times its estimated future profits. Its product is proving to be resilient, even amid growing competition. As Zoom’s revenue growth slowed, the company saw its margins shrink and eventually its bottom line fell into the red. But as the company cut costs and worked on efficiencies, it returned to profitability, reporting positive earnings in each of its three most recent quarters. As someone who has used both Zoom and Teams (and knows how frustrating the latter can be), I understand why Zoom still has a following.

In that same time, the Computer and Technology sector gained 12.39%, while the S&P 500 gained 6.45%. As we observed, the pandemic dramatically accelerated the adoption of videoconferencing tools, with Zoom emerging as the market leader. As of 2020, the overwhelming majority of Zoom users (89%) used the software ig sentiment indicator for work purposes, such as meetings, video calls, and webinars. 63% of people used Zoom for personal purposes, such as conversations with friends and family. It goes without saying that there’s a large overlap between the two groups. Before Zoom’s IPO in April 2019, the company’s market cap was $6.8 billion.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy. Speak to a financial advisor before investing in Zoom or any stock. Although many investors are calling Zoom a hold right now, note that equal numbers are calling it a buy or overweight, according to the Wall Street Journal.

  1. The company’s other products, such as Zoom Phone, which can replace traditional phone systems to allow for voice over IP calling without video, could be a market disruptor, according to IBD.
  2. So, the chances are that you don’t need Zoom’s paid version if you plan to talk to less than 100 people for less than 40 minutes.
  3. Meetings on the platform can host as many as 1,000 participants while webinars can scale up to as many as 50,000.
  4. Zoom (ZM) stock prices, likewise, soared, reaching a high of more than $500 per share by September 2020.

As of January 2023 (FY23), its total annual revenue was $4.392 billion – a 7.13% increase from the previous fiscal year, at $4.099 billion in revenue. And the first quarter of 2023 also showed promising revenue results – the company made over $1.105 billion in Q1, showing a 3% YoY growth. Zoom SaaS has a very prominent place in the videoconferencing and B2B SaaS market.

Price Target and Rating

We believe everyone should be able to make financial decisions with confidence. 450 employees have rated Zoom Video Communications Chief Executive Officer Eric S. Yuan on Glassdoor.com. Eric S. Yuan has an approval rating of 97% among the company’s employees. This puts Eric S. Yuan in the top 30% of approval ratings compared to other CEOs of publicly-traded companies.

What is Zoom and how does it work?

The fact that revenue hasn’t fallen drastically is a testament to the strength and popularity of Zoom’s service. At the end of fiscal 2021, Zoom predicted its revenue would rise 42%-43% in fiscal 2022, compared to its latest guidance for 51% growth. Therefore, Zoom clearly prefers to temper Wall Street’s expectations instead of raising the bar too high and setting itself up for a big earnings miss. Would buying Zoom put you too deep into the technology sector?

Although the analysts’ average price target of $311.76 supports that consensus, projecting an increase of over 68% from its most recent closing price of $185.25, 12 “hold” ratings factored into the consensus. The average target is based on a low target of $207 and high of $571.91, with $299 being the median. Empirical research indicates that these revisions in estimates have a direct correlation with impending stock price performance.

Zoom’s free version allows up to 100 participants, and the paid plan allows up to 1,000. So, the chances are that you don’t need Zoom’s paid version if you plan to talk to less than 100 people for less than 40 minutes. The number of Zoom meetings skyrocketed during the pandemic, but according to the statistics, https://g-markets.net/ the numbers haven’t fallen in the years since. It was continuously rising from June 2020 to October 2020, reaching $559 on the 20th of October. It dipped after the COVID-19 vaccine was announced and has never reached that peak again. Zoom’s shares have been trading at a value below $100 since August 2022.

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. Zoom’s operating margins are expanding as its scale improves and its data center capacity rises. NerdWallet, Inc. is an independent publisher and comparison service, not an investment advisor. Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only.

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.

The video conferencing software company’s stock tumbled after its latest earnings report.

Also, Zoom Video has forged new deals in the enterprise market, such as one with software maker ServiceNow (NOW). 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.

Zoom Video Communications Management

18 Wall Street equities research analysts have issued “buy,” “hold,” and “sell” ratings for Zoom Video Communications in the last twelve months. There are currently 2 sell ratings, 11 hold ratings and 5 buy ratings for the stock. The consensus among Wall Street equities research analysts is that investors should “hold” ZM shares.

Zoom Video Communications Inc at UBS Technology Conference Transcript

Generally, analysts give an estimate for a company’s earnings per share (EPS) and revenue; these figures are most often made for the quarter, fiscal year, and next fiscal year. The size of the company and the number of analysts covering it will dictate the size of the pool from which the consensus estimate is derived. The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$29b. The last step is to then divide the equity value by the number of shares outstanding.