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advaith_sastry
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The Internet – Software industry is part of the Computer and Technology sector. Currently, this industry holds a Zacks Industry Rank of 34, positioning it in the top 14% of all 250+ industries. 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%. 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.
Zoom Video Communications, Inc. Class A
For a company like Zoom that has been so tied in investors’ minds to the pandemic, it can be difficult to take a step back and see the forest for the trees. Taken without the noise of the past two years, Zoom is clearly a buy for existing shareholders or those investors looking to start a position. Zoom Video reported revenues of $1.16 billion in the last reported quarter, representing a year-over-year change of +2.1%. While media releases or rumors about a substantial change in a company’s business prospects usually make its stock ‘trending’ and lead to an immediate price change, there are always some fundamental facts that eventually dominate the buy-and-hold decision-making.
A rough start to 2022 despite strong financial performance
The company was incorporated in 2011 and is headquartered in San Jose, California. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation.
That mascot character is Eliza, an open-source framework for AI characters that can interact with people on social media. 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 facts discussed here and much other information on Zacks.com might help determine whether or not it’s 3 dividend stocks that pay you more than pepsico does worthwhile paying attention to the market buzz about Zoom Video. However, its Zacks Rank #2 does suggest that it may outperform the broader market in the near term.
Investors should also note any recent changes to analyst estimates for Zoom Video Communications. Such recent modifications usually signify the changing landscape of near-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company’s business outlook. In terms of the entire fiscal year, the Zacks Consensus Estimates predict earnings of $5.34 per share and a revenue of $4.64 billion, indicating changes of +2.5% and +2.43%, respectively, from the former year. In addition to that, I don’t think Zoom is currently trading at an attractive-enough valuation — investors who are still excited about Life of a trader the stock may be wise to wait for a larger decline before considering an investment. Here at Zacks, we prioritize appraising the change in the projection of a company’s future earnings over anything else.
Today, Zoom is trading at 31.6 times earnings, whereas top competitors like Cisco (CSCO 1.47%), Microsoft (MSFT 0.10%), and Alphabet (GOOGL -1.91%) (GOOG -1.79%) 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. To make the decision even easier, Zoom is trading at or near its low for price-to-earnings (P/E) and price-to-sales (P/S) ratios.
Earnings Per Share
- The company beat consensus EPS estimates in each of the trailing four quarters.
- As a result, we can interpret positive estimate revisions as a good sign for the company’s business outlook.
- 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.
Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. However, Zoom has rapidly turned into a value stock that returns a respectable level of free-cash-flow growth. If Zoom can start monetizing some of the AI potential Ark Invest sees, it could inspire another bull market in its stock. 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.
More importantly, the growth in larger customers — those with more than 10 employees and those spending more than $100,000 in revenue — provides a large base to upsell new features and hardware options as Zoom’s offerings expand. 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 5.03%). 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 how to transfer vis from one wand to another year.
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. Admittedly, investors like Ark Invest may have to adjust their expectations. With 2026 just two years away, Ark Invest’s base case estimates are looking increasingly unlikely to come to pass, and it may even fall short of the $700-per-share bear case estimate. Also, 3% revenue growth will probably not inspire growth-oriented investors. Zoom Video Communications Inc. (ZM) offers a video-first communications platform used by millions of people worldwide for both business and personal use.
