ZM – Zoom Video Communications Inc Forecast – – Key Points
Zoom Video Communications has received a consensus rating of Buy. The company’s average rating score is , and is based on 14 buy ratings, 14 hold ratings. Indeed, ZM rallied by as much as % at its peak during fueled by the trends in remote working and virtual learning, only to reverse.
Should I buy Zoom Video Communications (ZM) – Zacks
I accept X. If a company’s expenses are growing faster than their sales, this will reduce their margins. The thinking here is that there are synergies between Zoom’s core unified communications product and customer experience solutions. The most common way this ratio is used is to compare it to other stocks and to compare it to the 10 Year T-Bill. Dawn Allcot is a full-time freelance writer and content marketing specialist who geeks out about finance, e-commerce, technology, and real estate. This means our website may not look and work as you would expect. By Gabrielle Olya.
ZM Stock Price Forecast. Should You Buy ZM? – The huge pandemic winner has seen its stock tumble over the past year.
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Learn More. When the pandemic hit in , it seemed like everyone around the world started using the product for online communications with friends and co-workers. But now, with the pandemic heading into the rearview mirror and many people returning to in-person meetings, investors are nervous about Zoom stock. But if we look deeper into how Zoom’s business has performed over the past year, it is a lot healthier than the stock price might indicate.
Does that make Zoom stock a buy right now? Zoom’s growth last year came from an expanding customer base and more spending from each customer. A net dollar expansion rate measures revenue growth from existing customer cohorts. Unlike a lot of software stocks, Zoom Video is highly profitable. Since Zoom offers long-term subscription contracts to customers, it is forced to defer revenue from the income statement to the cash flow statement, which is why FCF is typically higher than operating income.
Over time, FCF will be the best metric for valuing this stock. So what’s the catch? The problem is investors are skittish about future growth and churn coming out of the pandemic. This would be a major slowdown from last year to low-teens revenue growth. While not a terrible situation, some investors might be thinking this is the best it will get and that the Zoom platform reached saturation during the pandemic.
This might be true for individuals joining Zoom meetings. But management has a couple of growth drivers up its sleeve: enterprise growth, Zoom Phone, Zoom Contact Center, and international growth. We already discussed enterprises, which management is focusing on as it brings in larger and more durable revenue streams for the business.
Investors should expect enterprise customers to steadily grow for Zoom over the next few years. Zoom Phone and Zoom Contact Center are two new products that management hopes to cross-sell to existing clients to drive its net dollar expansion rate. Zoom Phone is a cloud-based business phone product that aims to replace the clunky legacy systems a lot of companies have. Contact Center is a very new product that is being offered to Zoom clients who want a cloud-based call center connected to their video communications platform.
Zoom also has many other ancillary products, like Zoom Chat, that will hopefully drive down churn and increase spending from its current customers. Lastly, management thinks it can grow faster outside of the Americas, where Zoom is not as penetrated as in the U. Management said on the conference call they expect this trend to continue in the coming years.
After looking at the financials and reading the company’s product roadmap, I think Zoom Video stock could be a great long-term purchase at these prices. There are risks with investing in any stock. But if Zoom’s FCF continues to grow over the next three to five years, I think investors will be happy looking back at today’s prices. Cost basis and return based on previous market day close. Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of Discounted offers are only available to new members.
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