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The slowdown in growth, combined with ongoing macroeconomic headwinds and geopolitical concerns, will put additional downward pressure on Zoom’s valuation for the foreseeable future. We essentially look at how sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest business trends. And if earnings estimates go up for a company, the fair value for its stock goes https://forexanalytics.info/ up.

How to buy Zoom stock

Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. Top institutional shareholders of Zoom Video Communications include AQR Capital Management LLC (1.85%), Pacer Advisors Inc. (1.70%), Acadian Asset Management LLC (1.59%) and Sumitomo Mitsui Trust Holdings Inc. (1.21%). Insiders that own company stock include Santiago Subotovsky, Eric S Yuan, Velchamy Sankarlingam, Shane Crehan, Aparna Bawa, Jonathan Chadwick, Carl M Eschenbach, Ryan Azus and Kelly Steckelberg. Zoom’s latest fiscal year (FY) was FY 2021, which ended Jan. 31, 2021.

So, it might be a good idea to review some of the factors that might affect the near-term performance of the stock. Wondering what the next stocks will be that hit it big, with solid fundamentals? Click the link below to learn more about how your portfolio could bloom. Prior to founding Zoom, Yuan was corporate vice president of engineering at Cisco, and was a founding engineer and vice president of engineering for web and videoconferencing platform Webex. As of Aug. 23, 2021, Zoom had 240,744,533 outstanding shares of Class A common stock and 56,383,369 outstanding shares of Class B common stock.

ZM’s financial health

1. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month.
2. Zoom Video Communications (ZM Quick QuoteZM – Free Report) is one of the stocks most watched by Zacks.com visitors lately.
3. For the current fiscal year, the consensus earnings estimate of $5.04 points to a change of -3.3% from the prior year.
4. 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.
5. There is one caveat worth mentioning — Zoom’s growth in the coming years is expected to let up significantly from current levels.

Since 1988 it has more than doubled the S&P 500 with an average gain of +23.68% per year. These returns cover a period from what is initiative forex psychology explained January 1, 1988 through August 5, 2024. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return.

A higher fair value than the current market price drives investors’ interest in buying the stock, leading to its price moving higher. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. 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. Revenue and earnings growth remain strong — analysts are forecasting revenue and earnings per share to grow by 54% and 46% year over year up to $4.1 billion and $4.87 per share in fiscal year 2022, respectively. Zoom has almost no debt, boasting a debt-to-equity ratio of 2% and a strong cash position of $1.3 billion.

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(New to this? See how to open a brokerage account.) In short, you’ll want to look for a broker that has a low account minimum, no trade commissions and a user-friendly trading platform. One way to invest in Zoom and diversify at the same time might be to buy an index fund or exchange-traded fund. Index funds and ETFs track a market index and allow you to hold stock in hundreds of different companies within one fund. And there are a number of funds with Zoom among their holdings. Zoom makes money by selling its platform subscriptions to everyone from single users to companies with hundreds of thousands of employees.

Zoom Phone was called out on the most recent earnings call as having triple-digit year-over-year revenue growth, showing these new initiatives are starting to pay off. 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. Impact on your credit may vary, as credit scores are independently determined by credit bureaus based on a number of factors including the financial decisions you make with other financial services organizations.

Unlike some other firms, Zoom went into its IPO as a profitable company. Zoom remains popular in workplaces, though its stock price has dropped considerably since the early days of the pandemic. Read on to find out how to evaluate Zoom stock and decide whether to buy. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research.

Privacy Policy | No cost, no obligation to buy anything ever.Past performance is no guarantee of future results. Zoom Video is graded B on this front, indicating that it is trading at a discount to its peers. Click here to see the values of some of the valuation metrics that have driven this grade. Upgrade to MarketBeat All Access to add more stocks to your watchlist. The company is headquartered in San Jose, Calif., and has additional offices in more than 15 locations in the United States, Europe, Asia, and Australia. Zoom’s management also views international expansion as an important opportunity.

The company also grew free cash flow by over 1,100% in fiscal year 2021 up to $1.4 billion. The significant climb in free cash flow was a result of superb revenue growth stemming from pandemic-driven demand. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer.

Our experts picked 7 Zacks Rank #1 Strong Buy stocks with the best chance to skyrocket within the next days. Compared to the Zacks Consensus Estimate of $1.13 billion, the reported revenues represent a surprise of +1.41%. Zoom Video Communications (ZM Quick QuoteZM – Free Report) is one of the stocks most watched by Zacks.com visitors lately.

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Even though a company’s earnings growth is arguably the best indicator of its financial health, nothing much happens if it cannot raise its revenues. It’s almost impossible for a company to grow its earnings without growing its revenue for long periods. Therefore, knowing a company’s potential revenue growth is crucial. Would buying Zoom put you too deep into the technology sector?

For that period, the company reported net income of $672.3 million on revenue of $2.7 billion. Looking back at the last two years, there may be no stock more representative of the pandemic’s impact on the stock market than Zoom Video Communications (ZM -0.59%). After growing parabolically in 2020, the stock has come crashing back to earth and is down 45% year to date at the time of this writing. This is especially stark when compared to the S&P 500, which is up 27% on the year.

For better or worse, Zoom has become synonymous with the pandemic. Its rise to prominence and the resulting performance were tied to a massive need for video communications at the height of lockdowns. This demand pulled forward a ton of growth and warped some investors’ views of the company’s fundamentals. In addition to that, I don’t think Zoom is currently trading at an attractive-enough valuation — investors who are still excited about the stock may be wise to wait for a larger decline before considering an investment. Zoom Video reported revenues of $1.14 billion in the last reported quarter, representing a year-over-year change of +3.3%.