Therefore, you might want to consider some of the key factors that could influence the stock’s performance in the near future. 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. The U.S. government has been increasing its scrutiny of Zoom on several fronts.

1. This demand pulled forward a ton of growth and warped some investors’ views of the company’s fundamentals.
2. That valuation positions the stock for a massive surge if the company can stoke a recovery in revenue growth.
3. Wood and her team predicted a $1,500-per-share price target for Zoom by 2026, a 22-fold gain from current levels.
4. Please bear with us as we address this and restore your personalized lists.

ZM vs App Stocks

Zoom makes up almost 7% of its flagship fund, the Ark Innovation ETF, making the Cathie Wood investment its fourth-largest holding. Across all Ark Invest funds, Zoom makes up around 4.5% of the company’s holdings. Still, the bear estimate calls for a $700-per-share or less stock price, amounting to more than a 10-fold gain from current levels if that price target holds. And yet the business performed solidly throughout the past few years even as the stock fell.

Projected Revenue Growth

Whereas during the pandemic the case could be made that the company’s valuation got ahead of itself, it’s clear now that the valuation is more in line with, if not underestimating, Zoom’s fundamentals. While the growth has slowed when compared to the pandemic highs, it’s clear that Zoom is still executing and growing — and worth considering heading into 2022. Each of these initiatives are designed to expand the business beyond the simple videoconferencing app the company became known for. 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. Its rise to prominence and the resulting performance were tied to a massive need for video communications at the height of lockdowns.

The platform connects people via video, phone, chat, and content sharing and can be integrated across a broad range of devices. 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 Stock market correction coming 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. For the current fiscal year, the consensus earnings estimate of $5.34 points to a change of +2.5% from the prior year. For the current quarter, Zoom Video is expected to post earnings of $1.31 per share, indicating a change of +1.6% from the year-ago quarter.

The company said that the agreement had not received the required number of votes from Five9 shareholders to approve the merger. Department of Justice-led panel, named Team Telecom, was investigating the proposed merger’s potential national security risks. Select to analyze similar companies using key performance metrics; select up to 4 stocks. Instead it’s the creation of a different, unnamed “partner” that he said is working with the ai16z team.

The one area of modest strength is bullish and bearish flag patterns non-GAAP (adjusted) free cash flow, which increased almost 14% yearly to more than $1.1 billion in the first three quarters of 2023. That was not enough to persuade investors to buy Zoom stock, as it is up just 1% from year-ago levels. 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.

The Zacks Consensus Estimate remained unchanged over the last 30 days. Zoom even initiated new growth efforts, building out an artificial intelligence (AI)-driven communications ecosystem. Then there is the endorsement of Ark Investment Management’s CEO Cathie Wood, whose bold predictions regarding if you invested $10,000 in netflix’s ipo, this is how much money you’d have now other tech stocks (like Tesla and Bitcoin) have come to pass. Wood and her team predicted a $1,500-per-share price target for Zoom by 2026, a 22-fold gain from current levels. 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. ZM’s industry had an average PEG ratio of 2.41 as of yesterday’s close.

Zoom Video Communications (ZM 4.88%) is a bit of a mystery as a growth stock. 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.

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. There is one caveat worth mentioning — Zoom’s growth in the coming years is expected to let up significantly from current levels. As the pandemic unwinds and Zoom becomes a more mature company, it’s inevitable that sales growth will come down from its all-time highs. 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.

Zoom Stock: Buy, Sell, or Hold in 2022?

Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock’s fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-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.

Valuation Measures

Zoom Video Communications, Inc. provides unified communications platform in the Americas, the Asia Pacific, Europe, the Middle East, and Africa. It serves individuals; and education, entertainment/media, enterprise infrastructure, finance, government, healthcare, manufacturing, non-profit/not for profit and social impact, retail/consumer products, and software/Internet industries. The company was formerly known as Zoom Communications, Inc. and changed its name to Zoom Video Communications, Inc. in May 2012.