On Tuesday, Shaw “set her free” and endorsed the new ELIZA token, whose sanctioned creators have pledged to give a valuable chunk to ai16z’s treasury. The latest trading session saw Zoom Video Communications (ZM) ending at $77.75, denoting a -1.49% adjustment from its last day’s close. Elsewhere, the Dow saw a downswing of 0.28%, while the tech-heavy Nasdaq appreciated by 1.04%.
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ZM’s industry had an average PEG ratio of 2.41 as of yesterday’s close. Zoom’s valuation has surely contracted, but it’s still not desirable when observing the company’s peer group. Today, Zoom is trading at 31.6 times earnings, whereas top competitors like Cisco (CSCO 1.72%), Microsoft (MSFT 1.00%), and Alphabet (GOOGL -1.71%) (GOOG -1.58%) are trading at price-to-earnings multiples of 20, 31, and 24, respectively. Given the expected slowdown in Zoom’s growth, I think it’s safe to say that the company is still trading at expensive valuation multiples. 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 alpari forex broker review pay off.
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Admittedly, the company’s results have come nowhere close to matching that expected growth. In the first nine months of 2023, revenue of $3.4 billion increased by only 3% yearly. Ark Invest has backed estimates up by taking a significant position in the media stock. 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. The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an How to buy a nft impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988.
These returns cover a period from January 1, 1988 through October 7, 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.
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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. In 2020, the United States charged a China-based Zoom executive with conspiring to disrupt videoconference commemorations of the 1989 Tiananmen Square democracy protests. Zoom is also the focus of several ongoing federal investigations related to its dealings with Beijing, according to the Journal.
The one area of modest strength is 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. During that period, its net income of $339 million surged 63% higher. Still, operating income fell during that period, and much of the gain came from $114 million in “other income,” which consists of income from interest, foreign currency, and marketable securities.
Bureau of Labor statistics released in January, 11% of workers were still teleworking as of December 2021. Zoom ended the last quarter with $5.4 billion in cash, cash equivalents, scalping forex guide and marketable securities and only $97 million in debt. To that end, Zoom has recently introduced Zoom Phone, Zoom Meetings, Zoom Video Webinars, and Zoom for Home. 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.
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Our experts picked 7 Zacks Rank #1 Strong Buy stocks with the best chance to skyrocket within the next days. Don’t let Zoom’s past success dictate your decision to invest in the company today. Zoom’s management also views international expansion as an important opportunity. Continuing the two-year comparisons, that number is up from Q3 2020, when international revenue was only 20% of total revenue. If Zoom can continue to grow internationally, it opens up plenty of new revenue opportunities.
Unfortunately for Zoom bulls, that “increase” is likely a one-time event. 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. Ai16z is attempting to position itself as a prominent entity in the AI wave.
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. With growth expected to hit the breaks in the years ahead, the company will likely become less attractive to investors who bought into Zoom’s growth story. Its forward price-to-earnings (P/E) ratio is just under 14, and the price-to-sales (P/S) ratio of less than 5 is just above all-time lows. That valuation positions the stock for a massive surge if the company can stoke a recovery in revenue growth. Zoom is a member of the information technology sector and operates within the software industry.
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- The U.S. government has been increasing its scrutiny of Zoom on several fronts.
- Investors should also note any recent changes to analyst estimates for Zoom Video Communications.
- That valuation positions the stock for a massive surge if the company can stoke a recovery in revenue growth.
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. 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. And yet the business performed solidly throughout the past few years even as the stock fell. 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.