| Snowflake Score | |
|---|---|
| Valuation | 5/6 |
| Future Growth | 3/6 |
| Past Performance | 5/6 |
| Financial Health | 6/6 |
| Dividends | 0/6 |
ZM Stock Overview
Zoom Video Communications, Inc. provides unified communications platform in the Americas, the Asia Pacific, Europe, the Middle East, and Africa.
Rewards
Risk Analysis
No risks detected for ZM from our risk checks.
Zoom Video Communications, Inc. Competitors
Price History & Performance
| Historical stock prices | |
|---|---|
| Current Share Price | US$108.06 |
| 52 Week High | US$364.15 |
| 52 Week Low | US$79.03 |
| Beta | -0.61 |
| 1 Month Change | 0.065% |
| 3 Month Change | 13.94% |
| 1 Year Change | -70.22% |
| 3 Year Change | 19.22% |
| 5 Year Change | n/a |
| Change since IPO | 74.29% |
Recent News & Updates
Zoom Stock May Come Hurtling Back To Earth (Technical Analysis)
Zoom stock has risen sharply in recent weeks. But the stock is no bargain and may see sharply lower prices following results. The shares could easily fall below $100. This story was originally published for subscribers of Reading The Markets, an SA marketplace service, on August 10. The technical chart was updated on the morning of August 12 for this story. Zoom Video Communications, Inc. (ZM) will report fiscal third-quarter results on August 22, and despite the stock's big move higher over the past several weeks, analysts forecast terrible earnings from the company. Analysts estimate third-quarter revenue to drop 33% y/y to $0.91, while revenue growth slows to just 9.4%, bringing total revenue to $1.1 billion. Meanwhile, analysts estimate that net addition will be around 211,500 in the quarter, as total customers increase by 0.6% y/y to 508 million. Additionally, the stock's valuation has fallen dramatically in recent months and now finds itself trading for 17.6 times EV/EBITDA and 29.3 times this year's earnings estimates. Which isn't nearly at the insane valuations this stock once saw at the peak of the Covid-19 bubble phase. Bloomberg However, the drop in the valuation has been due to the slowing growth rate, and as a result, the PEG ratio has soared. Zoom's PEG ratio is now at 5.7, which suggests that when adjusted for earnings growth, Zoom's P/E multiple is very high, and despite the P/E being cheaper than prior points in time, Zoom's stock is no bargain. Typically, a stock is considered fairly valued from a growth-adjusted basis when the PEG ratio is trading between 1 and 1.5. Bloomberg Options Bet This high growth-adjusted valuation and big rally are causing someone to bet that Zoom's stock will come hurtling back to earth very soon. On August 10, the open interest for the Zoom $125 October 21 puts rose by around 16,100 contracts. The data shows the puts were bought on the ASK for $25.25 per contract. It is a massive wager, with nearly $40.6 million in premiums paid. This could be a hedge, but that seems like a lot of money to be paid in premiums for a hedge. It may very well be a way for someone to make a massive bet that Zoom is trading sharply lower by the middle of October without having to short the actual stock, which in nominal terms would have been even more expensive, and the equivalent of around 1,600,000 shares. The bearish bet would imply that the stock will be trading below $100 by the middle of October if the trader holds the options until expiration.
Is There An Opportunity With Zoom Video Communications, Inc.'s (NASDAQ:ZM) 34% Undervaluation?
Does the August share price for Zoom Video Communications, Inc. ( NASDAQ:ZM ) reflect what it's really worth? Today, we...
Zoom: My Mistake In A Phase Transition And The Sinking Ark
What was the story in Zoom Video Communications? What is a phase transition? ARK invest is sailing into stormy waters with Zoom. What to expect in the Zoom Q2 earnings report. In May of 2020, I warned that Zoom Video Communications (ZM) was overvalued and would not sustain its lofty valuation. The stock went a lot higher before it eventually crashed to my bearish target near $70. Although I was right about the valuation I will explain my mistake in a Phase Transition and also discuss a wildly bullish projection by ARK Invest analysts (ARKK). What happened in Zoom Video Communications? Zoom Communications timed its launch perfectly and some early adoption saw the company enter the market as a video meeting competitor. That led to the market storming into this name and giving it an eventual P/E ratio of 400x. During that first article I said: "If Zoom were to match the revenues of Skype and be valued at a more realistic, but still favorable, valuation of around 6x sales, they could be worth $10 billion. The current market cap is $34 billion." Fast forward two years later and Zoom is still worth 7x sales with a valuation of $30bn. The price at publication was $140 and I said that the stock could go to $70. The stock is actually 30% lower from my first call and trading near $100 after lows at $79.03 and there is still downside risk with the post-pandemic reopenings. The only thing that I lost in this stock was pride, but many were sucked into the false promises of Wall Street and are likely still long. What I missed in this name was a Phase Transition in buying that was driven by a longer-than-expected pandemic and driven by an unrealistic growth tangent that unfortunately still exists to this day. What is a phase transition? I recently wrote a book called The Stock Market is Easy and in one of the chapters I talk about the phase transition. A phase transition is a qualitative change in the state of a system under a continuous change in an external parameter (Li, 2002). In science, a phase transition is a 'change in state from one phase to another.' The defining characteristic of a phase transition is an abrupt change in physical properties. Phase Transition (Science Direct) The changing of state from water to steam is an example and once we cross the boiling point of water, the transition picks up speed and leads to a rapid pressure increase. In financial markets, this can be seen when there is a transition from bearish to heavily bullish or vice versa. Many investors can be turned off from a stock due to a previous period of bearishness or inactivity - think GameStop (GME) and AMC Entertainment (AMC). When the transition comes, many will miss out because they may have an inherent bias against the name, or against the sector. The transition does not have to come after a bearish period but can come from a change in external circumstances. Trying to be smart with technical analysis and standard valuation metrics failed in Zoom because the water was already boiling and a break above the resistance at $180 led to a sharp move higher. Zoom ((W)) (Trading View) The shift was more from bullish or neutral to ultra-bullish and caused market participants to become exuberant and overvalue the price and prospects for Zoom. The phase transition is an important aspect to remember in financial markets because bulls and bears can be caught in a tug of war that makes observers complacent. Ironically, I called the breakout in Peloton (PTON) at the same time and it too saw a phase transition where the bears were bulldozed. However, in both cases, I didn't expect the pandemic to run as long as it did. It is always important for investors to update their outlook and consider what has changed. The conflict in Ukraine and the recent aggressiveness of the Federal Reserve are prime examples. Investors can be caught up in previously held assumptions and correlations but should be looking more closely at investment flows and consider what has changed. Many investors tried to buy the dip on this tech wreck many times on the way down but were doing so based on yesterday's environment. Cathie Wood's ARK is in stormy waters with Zoom ARK Invest, the ETF empire of Cathie Wood, has released a ridiculously bullish case for Zoom recently with a price target of $1,500 in Zoom by 2026. That would be a 13x surge in the name and it seems like a marketing gimmick to capture new investors after a year of outflows. Based on the Monte Carlo model, the company has a bull and bear case of $2,000 and $700. 2026 Targets ZM (Ark Invest) ARK importantly notes in the footer, that "Forecasts are inherently limited and cannot be relied upon as a basis for making an investment decision and are built on our modeling that reflects our biases and long-term positive view of the company." Being gloomy about stocks is not a good marketing approach for selling ETFs and that really underlines the purpose of the company's open source research model. Author Nicholas Nassim Taleb said in his book, Fooled By Randomness, that the Monte Carlo tool was the closest thing he had ever seen to a toy in his adult life. Although he admitted to liking the model, analysts should be realistic about future scenarios and ARK Invest seem to be detached from reality with theirs. ZM Metric Predictions (Ark Investment) In the bullish and bearish predictions for Zoom, the company only sees a difference of 30M global workers but a 90M difference in paying users. They also see the number of workers using the platform increasing by 18-50% but they expect that paying users will increase by 150-400%. That is the real flaw in ARK's modeling, where they believe that there will be an overnight shift of digital workers embracing the platform. Businesses are streamlining their expenses as the world lurches towards a recession so there is potential for the company to lose some paying customers and drift further from the ARK targets in the near term. On the revenue side, we are also given a projected 650% increase on the bear case 150% increase in subscribers. ARK obviously believes that there is a dormant waterfall of cash just waiting to erupt into Zoom products. The world has embraced the work-from-home and hybrid models but after offices reopened, that has seen growth going into reverse at Zoom. Revenue Growth (Zoom) In the latest Zoom earnings presentation, the company shared that it had increased revenues by 12% in Q1 Y-o-Y. They forgot to add that revenue growth is on a severe downward trend over that year from 355% and a high of 369%. The last three quarters have seen revenues of $1,050 million, $1,071, and $1,073, and this highlights that the company is stagnating. Quarterly Growth (Zoom Video) We are back in the same trend as before where analysts cannot make realistic projections for the future. The difference this time around is that liquidity has disappeared and investors are no longer giving a pass to fantasy valuations. ARK knows this only too well because they have continued plunging into Zoom after believing that prices above $400 marked the dip and are now down around 80% on the stock. In the company's flagship ARK Innovation ETF (ARKK), ZM is the largest weighting at 9.49%, while the Next Generation Internet ETF (ARKW) is made up of 8.14% in ZM. These are numbers that no hedge fund would dare replicate and the 13x price projection looks like an attempt to explain the investment mistake and attract new capital to keep buying the dip. The world in 2021 was still grappling with lockdowns which only changed at the turn of the new year and it is no coincidence that revenue growth has slumped at Zoom. ARK and other analysts are now looking ahead to a shift in companies to remote working but they cannot grasp that the last two years had that trend on fast forward. Companies that were forced to work from home had to grasp new working ideas and as soon as they were allowed to go back into the office, the revenues are drying up for Zoom.
Shareholder Returns
| ZM | US Software | US Market | |
|---|---|---|---|
| 7D | -4.3% | -0.9% | 1.3% |
| 1Y | -70.2% | -16.6% | -11.7% |
Return vs Industry: ZM underperformed the US Software industry which returned -14.6% over the past year.
Return vs Market: ZM underperformed the US Market which returned -11.6% over the past year.
Price Volatility
| ZM volatility | |
|---|---|
| ZM Average Weekly Movement | 10.0% |
| Software Industry Average Movement | 10.5% |
| Market Average Movement | 7.8% |
| 10% most volatile stocks in US Market | 16.9% |
| 10% least volatile stocks in US Market | 3.2% |
Stable Share Price: ZM is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 10% a week.
Volatility Over Time: ZM's weekly volatility (10%) has been stable over the past year.
About the Company
| Founded | Employees | CEO | Website |
|---|---|---|---|
| 2011 | 7,155 | Eric Yuan | https://www.zoom.us |
Zoom Video Communications, Inc. provides unified communications platform in the Americas, the Asia Pacific, Europe, the Middle East, and Africa. The company offers Zoom Meetings that offers HD video, voice, chat, and content sharing through mobile devices, desktops, laptops, telephones, and conference room systems; Zoom Phone, an enterprise cloud phone system; and Zoom Chat enables users to share messages, images, audio files, and content in desktop, laptop, tablet, and mobile devices. It also provides Zoom Rooms, a software-based conference room system; Zoom Hardware-as-a-Service allows users to access video communication technology from third party equipment; Zoom Conference Room Connector, a gateway for SIP/H.323 endpoints to join Zoom meetings; Zoom Events, which enables users to manage and host internal and external virtual events; OnZoom, a prosumer-focused virtual event platform and marketplace for Zoom users to create, host, and monetize online events; and Zoom Webinars to provide video presentations to large audiences from many devices.
Zoom Video Communications, Inc. Fundamentals Summary
| ZM fundamental statistics | |
|---|---|
| Market Cap | US$32.24b |
| Earnings (TTM) | US$1.26b |
| Revenue (TTM) | US$4.22b |
25.6x
P/E Ratio7.6x
P/S RatioIs ZM overvalued?
See Fair Value and valuation analysisEarnings & Revenue
| ZM income statement (TTM) | |
|---|---|
| Revenue | US$4.22b |
| Cost of Revenue | US$1.05b |
| Gross Profit | US$3.17b |
| Other Expenses | US$1.90b |
| Earnings | US$1.26b |
Last Reported Earnings
Apr 30, 2022
Next Earnings Date
Aug 22, 2022
| Earnings per share (EPS) | 4.23 |
| Gross Margin | 75.07% |
| Net Profit Margin | 29.91% |
| Debt/Equity Ratio | 0% |
How did ZM perform over the long term?
See historical performance and comparison