On the earnings front, Wall Street analysts are forecasting an average annualized growth of 28% over the next five years up to an earnings per share of $6.21 per share in fiscal year 2026. 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. 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 is a relatively new company that has managed to consistently increase its revenue and earnings YoY.
We’ve outlined a few different ways to send a Zoom invite, but the easiest way is to share the meeting join link, which you’ll receive when you schedule or start a meeting. You don’t need an account to attend a Zoom meeting, and the platform is compatible with Mac, Windows, Linux, iOS, and Android, meaning nearly anyone can access it. For the full year, Zoom expects its revenue to increase 51% and for its adjusted EPS to rise 42%-43%. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Luke Meindl has no position in any of the companies mentioned.The Motley Fool owns and recommends Alphabet (A shares), Cisco Systems, Microsoft, and Zoom Video Communications. Because of this, it is helpful to take a look at Zoom’s performance as compared to 2019.
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. 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.
- Continuing the two-year comparisons, that number is up from Q3 2020, when international revenue was only 20% of total revenue.
- This is especially stark when compared to the S&P 500, which is up 27% on the year.
- If you do have an account and want to schedule your first Zoom meeting, all you need to do is head to either the app, or your account page on the website, where you can click the “Schedule” option.
- However, if the company keeps building upon its financial results and gains market share in the video conferencing industry, it could result in a promising future for the relatively new company.
Zoom’s financials remain strong, but I think the company needs to improve future growth prospects to justify trading at current valuation multiples. With revenue and earnings growth expected to pull back in the years ahead, I wouldn’t be surprised to see growth-oriented investors exit their positions in Zoom stock. The slowdown https://www.forexbox.info/simple-money-a-no-nonsense-guide/ in growth, combined with ongoing macroeconomic headwinds and geopolitical concerns, will put additional downward pressure on Zoom’s valuation for the foreseeable future. Zoom Video Communications Inc. (ZM) offers a video-first communications platform used by millions of people worldwide for both business and personal use.
About Zoom Video Communications, Inc.
The Motley Fool owns shares of and recommends Five9, Microsoft, and Zoom Video Communications. 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. One key to Zoom’s success has been a “freemium” business model. Zoom Video in early March said company President Greg Tomb, a former cloud computing executive at Alphabet’s (GOOGL) Google, will leave.
Analysts are forecasting Zoom’s revenue to come in at $7.7 billion in fiscal year 2026, indicating an average annualized growth of 13% from 2022 estimates. Double-digit revenue growth for the next five years surely isn’t bad, but it doesn’t compare to the company’s 160% compound annual growth rate over the past three years. Mixed analyst reports and volatile financial markets mean it is unknown how Zoom’s share price will fluctuate in the future. However, it managed to increase its stock price by 200% in a period when the S&P 500 dropped by 17%, and has outperformed several high-profile tech stocks like Slack and Uber.
Zoom’s revenue rose 54% year over year to $1.02 billion during the second quarter and beat estimates by nearly $30 million. Its adjusted net income increased 51% to $415 million, or $1.36 per share, which cleared expectations by $0.20. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. All successful companies find ways to keep expanding their business in order to create new revenue streams and remain relevant in an ever-changing world. In order to do this, businesses need the cash to invest in research and development and capital improvements. Zoom has the balance sheet to do this and has been very active in rolling out new products.
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A combination of these factors and the likelihood of social distancing lasting throughout 2021 could boost Zoom’s revenue accordingly. Following the Covid-19 pandemic that impacted many workers’ lives throughout the world, Zoom’s stock reached a high point of approximately £570 in September 2020. Since this point, Zoom’s share price dropped slightly and is currently on a downtrend, trading for approximately £330 as of March 2021.
Zoom Stock: Buy, Sell, or Hold in 2022?
The company was a clear beneficiary of the work-from-home environment, a trend that is still very evident today. Bureau of Labor statistics released in January, 11% of workers were still teleworking as of December 2021. For a company like Zoom that has been so tied in investors’ minds to the pandemic, it can be difficult to take a 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. Zoom ended the last quarter with $5.4 billion in cash, cash equivalents, and marketable securities and only $97 million in debt. To that end, Zoom has recently introduced Zoom Phone, Zoom Meetings, Zoom Video Webinars, and Zoom for Home.
The platform connects people via video, phone, chat, and content sharing and can be integrated across a broad range of devices. Instead of trying to figure out exactly how much Zoom’s revenue growth will decelerate as the pandemic passes, investors should track its expanding operating margins and rising free cash flow. 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.
Zoom Video Communications
Meanwhile, recently told its employees to report to its offices on a more regular basis. Amid Covid-19 emergency, demand for Zoom videoconferencing software surged as businesses told employees to work from home. Demand timestamps shown in gt_io and in for collaboration tools, such as Zoom has hit a new high following the coronavirus pandemic. Most company’s employees are working from home and there is limited contact between businesses dealing with one another.
Alternatively, email editorial-team (at) simplywallst.com.This 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 https://www.forex-world.net/strategies/grid-trading-strategy-explained-and-simplified/ 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.
