Everything you need to know about using Zoom

Zoom Video benefited greatly from the COVID-19 pandemic as companies changed their business processes and required video-conferencing technology to establish new communication channels. Zoom Video owns a communications platform that includes video, voice, chat, and content sharing functionality which has seen growing customer uptake, especially in the enterprise market. For the current quarter, Zoom predicted adjusted earnings of $1.14 a share on sales of $1.13 billion. Analysts had been looking for earnings of $1.09 a share on sales of $1.13 billion in the fiscal fourth quarter. 17 Wall Street analysts have issued “buy,” “hold,” and “sell” ratings for Zoom Video Communications in the last year. There are currently 2 sell ratings, 10 hold ratings and 5 buy ratings for the stock.

Although Zoom Video gave no timetable for its stock buyback, the company could return almost all of this year’s FCF to shareholders. At a current share price of $68, the buyback could allow Zoom Video to repurchase about ~7% of its outstanding shares. Software companies measure their ability to upsell and organically grow their revenues through a ratio called net dollar expansion rate, or sometimes (dollar-based) net retention rate.

Reasons to Buy Zoom Video, and 1 Reason to Sell

Eric S. Yuan has an approval rating of 97% among the company’s employees. This puts Eric S. Yuan in the top 30% of approval ratings compared to other CEOs of publicly-traded fxprimus review companies. Zoom Video Communications’ stock was trading at $71.91 at the start of the year. Since then, ZM stock has decreased by 1.0% and is now trading at $71.19.

The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second ‘steady growth’ period. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when umarkets review these aren’t available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period.

Rather than increase revenue, Zoom Video expects gen AI tools to retain and add customers. With an end-of-year rally, Zoom stock advanced 6% in 2023. The Nasdaq composite shot up 43% amid buzz over generative artificial intelligence technology. © 2024 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions.

1. The Zoom Phone replaces traditional business PBX phone systems.
2. By doing this, you can sync calendars with Zoom in both directions, so your calendar client will offer an option to add a Zoom link, and your calendar will show Zoom Meetings you schedule in the Zoom app.
3. Zoom is one of the most popular video conferencing software systems on the market because of its easy-to-use feature set and affordable pricing.
4. The waiting room feature allows the meeting host to determine when participants can enter the meeting.

The concept behind a 130% increase in the price-to-earnings ratio came from decades of IBD research. The revenue challenge is compounded by another key challenge that I see and which relates to Zoom Video’s net retention rate, which has rather consistently declined in the last year as well. 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. Jon Swartz is a senior reporter for MarketWatch in San Francisco, covering many of the biggest players in tech, including Netflix, Facebook and Google. Jon has covered technology for more than 20 years, and previously worked for Barron’s and USA Today. Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.

The valuation is actually reasonable

As Zoom’s revenue growth slowed, the company saw its margins shrink and eventually its bottom line fell into the red. But as the company cut costs and worked on efficiencies, it returned to profitability, reporting positive earnings in each of its three most recent quarters. Net cash provided by operating activities avatrade scam totaled $351.2 million in the fourth quarter and free cash flow came in at $332.7 million. Zoom ended the quarter with approximately 220,400 enterprise customers, up 3.5% on a year-over-year basis. This is a basic rule of video conferencing etiquette, but it bears repeating, no matter which software you use.

The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.1%. We discount the terminal cash flows to today’s value at a cost of equity of 8.0%. Zoom Video’s biggest risk relates to the valuation, in my opinion. Shares are not cheap given the weakness in top line growth.

Zoom Video is racing to build more artificial intelligence tools into its business communications platform. Zoom Video recently backed off from a change in its terms of service for platform users that would have enabled it to gather data to train AI models. Zoom Video reported third quarter earnings that topped estimates but offered mixed guidance for the current period. Management has projected revenue of more than $4 billion and earnings of $4.77 per share this fiscal year. That would even further depress the above ratios despite Zoom growing sales 51% and profits 43% year over year. If it can maintain growth, Zoom will look like a steal in hindsight.

Should I Buy Zoom Video Communications Stock? ZM Pros and Cons Explained

This allows you to type in a strong password that you can share with meeting participants. Participants will be asked to enter the password to join the meeting. Those who don’t have the password won’t be able to join your meeting.

Plus, competitors like Microsoft (MSFT 0.01%) launched products like Teams and made it easier for users to find alternative videoconferencing options, which chipped away at Zoom’s dominance. On Jan. 18, Exane BNP Paribas analyst Stefan Slowinski downgraded the stock from Neutral to Underperform with a price target of $60 on Jan. 18, 2024. A P/S ratio of 3.0X would be more appropriate, considering that the company is not seeing any real top line growth anymore and that it is struggling with its NDER measure. A fair value P/S ratio of 3.0X implies a fair value, for me, of about $50.

Although its long-term prospects are uncertain, given its cheap valuation, Zoom is still a solid stock worth adding to your portfolio. Zoom’s stock is trading at only 14 times its estimated future profits. Its product is proving to be resilient, even amid growing competition. By accumulating free cash, Zoom can put it to work and potentially pursue acquisitions and growth opportunities. It’s when a business is not growing and not generating free cash that investors should be worried. A decline in Zoom’s value shouldn’t have come as a huge surprise to investors given that a return to normal would mean less of a need for video-based communications.

Analyst’s Opinion

The waiting room feature allows the meeting host to determine when participants can enter the meeting. The meeting host can admit attendees one-by-one or all at once. When you’re signed into Zoom, click the Schedule button to create a new meeting. Click on Advanced Options, check the box next to Enable Waiting Room. Zoom bombing, or Zoombombing, occurs when an uninvited individual gains access to your Zoom meeting.