Why Zoom Video Communications Could Be an Underrated Stock The Motley Fool
As the market closed yesterday, the Internet – Software industry was having an average PEG ratio of 1.85. The Zacks Consensus Estimate for the top line is currently pegged at $1.13 billion, indicating growth of 0.98% from the year-ago quarter.Non-GAAP earnings are expected in the range of $1.13-$1.15 per share. The consensus mark for earnings has remained steady at $1.15 per share over the past 30 days, indicating a decline of 0.93% year over year. 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.
- It’s when a business is not growing and not generating free cash that investors should be worried.
- 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.
- This target would spell a 1,563% climb from its IPO pricing at 36 a share in April 2019.
- Here’s why this stock is a no-brainer buy at the valuation it’s trading for.
Zacks may license the Zacks Mutual Fund rating provided herein to third parties, including but not limited to the issuer. 18 Wall Street research analysts have issued “buy,” “hold,” and “sell” ratings for Zoom Video Communications in the last year. There are currently 2 sell ratings, 11 hold ratings and 5 buy ratings for the stock. The consensus among Wall Street research analysts is that investors should “hold” ZM shares. A hold rating indicates that analysts believe investors should maintain any existing positions they have in ZM, but not buy additional shares or sell existing shares.
Analysts Offer Insights on Technology Companies: Verisign (VRSN), Accenture (ACN) and Zoom Video Communications (ZM)
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. Investors will be eagerly watching for the performance of Zoom Video Communications in its upcoming earnings disclosure. The company’s earnings report is set to be unveiled on February 26, 2024. In that report, analysts expect Zoom Video Communications to post earnings of $1.15 per share. Our most recent consensus estimate is calling for quarterly revenue of $1.13 billion, up 0.96% from the year-ago period.
Microsoft is upgrading its products with technology from startup OpenAI. Sales growth slowed for the ninth-straight quarter as the company adjusts to slower product demand in the post-coronavirus emergency era. Analysts have debated when decelerating sales will hit a bottom. Also, Zoom morphed into a social phenomenon as making video calls became routine for consumers to keep in touch with family and friends.
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The company’s earnings report is set to be unveiled on February 26, 2024. We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second ‘steady growth’ period. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren’t available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period.
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The move is designed to assess the potential for foreign participation in the U.S. telecom industry. Zoom has a research hub in China, and Five9 has operations in Russia. A breakout from a third, fourth or fifth-stage base that fails fast typically means sellers have the upper hand and the supply of available shares is thick. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. Morgan Stanley analyst Meta Marshall upgraded Zoom Video from an Equal-Weight rating to an Overweight rating and raised the price target from $360 to $400. The U.S. government has been increasing its scrutiny of Zoom on several fronts.
Zoom is a member of the information technology sector and operates within the software industry. They include legacy web-based meeting service providers such as Cisco Systems Inc.’s (CSCO) WebEx and LogMeIn Inc.’s GoToMeeting. Rivals also include bundled productivity solution providers with video functionality such as Alphabet Inc.’s (GOOGL) Google G Suite and Microsoft Inc.’s (MSFT) Microsoft Teams. Other competitors are unified communications as a service (UCaaS) and legacy private bank exchange (PBX) providers such as 8×8 Inc. (EGHT), Avaya Holdings Corp. (AVYA), and RingCentral Inc. (RNG). Zoom Video Communications Inc. (ZM) offers a video-first communications platform used by millions of people worldwide for both business and personal use.
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. Compared to the current share price of US$69.2, the company appears quite good value at a 30% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula – garbage in, garbage out.
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. Zoom still expects the deal to close in the first half of next year. It’s just another potential speed bump as Zoom tries to keep expanding beyond its role during the pandemic.
Zoom Video Communications, Inc. Price and EPS Surprise
Sign-up to receive the latest news and ratings for Zoom Video Communications and its competitors with MarketBeat’s FREE daily newsletter. Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing. Also, Zoom Video has forged new deals in the enterprise market, such as one with software maker ServiceNow (NOW). One key to Zoom’s success has been a “freemium” business model.
With this in mind, we can consider positive estimate revisions a sign of optimism about the company’s business outlook. Zoom’s latest fiscal year (FY) was FY 2021, which ended Jan. 31, 2021. For that period, the company reported net income of $672.3 million on revenue of $2.7 billion. Zoom Video Communications’ stock is owned by a variety of retail and institutional investors. Zoom Video Communications’ stock was trading at $71.91 at the beginning of the year. Since then, ZM shares have decreased by 13.6% and is now trading at $62.12.
Three, read The Big Picture each day to stay abreast of heavy distribution in the market. Recent recommendations have gained up to +175%, 498%, even +673%. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft and Zoom Video Communications. At last check Thursday, the stock was up 5.16% at $354.95.
The company is scheduled to release its next quarterly earnings announcement on Monday, February 26th 2024. Which stocks are likely to thrive in today’s challenging market? Click the link below and we’ll send you MarketBeat’s list of ten stocks that will drive in any economic environment. A “Zoom Meeting” refers to a videoconferencing session hosted on its cloud infrastructure.
And with positive earnings often comes strong free cash flow. In the trailing 12 months, Zoom has brought in more than $1.3 billion in free cash. Investors should also note that https://forexhero.info/ ZM has a PEG ratio of 0.4 right now. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock’s expected earnings growth rate.