IS ZOOM STILL A BUY?

PUBLISHED Jun 3, 2022, 9:32:23 AM        SHARE

img

IS ZOOM STILL A BUY?

Zoom Video Communications is arguably the video communications platform leader. Founded in 2011, the platform had its IPO in April 2019. The response was overwhelmingly positive, with the stock topping out at $104.49 mid-year.

However, things went bleak as the stock dipped to around $60 at the end of the year. 2020 was the rise and rise of Zoom. The Covid-19 pandemic in 2020 forced people to stay home and work remotely.

Zoom became the primary mode of communication, especially for meetings. These activities boosted the sales and revenue of the company significantly.

During this period, the performance of Zoom stock beat the outlook every quarter, especially in sales and profits.

During the pandemic, the growth trajectory of the Zoom stock was continually on an upward trend. Infographic: Zoom Consolidates Pandemic Gains | Statista You will find more infographics at Statista

That has changed with the resumption of pre-pandemic norms such as attending school and going to the office. So, is zoom a good bargain?

Zoom growth trajectory struggle

The communication company had a rough start in 2022 when the stock fell 40%. The market was bearish on growth stocks, as the future of such stocks becomes unpredictable by the day.

It is challenging to state the actual position of the expected trend of Zoom stock today, as the economic moat that kept them a powerhouse during the pandemic no longer exists.

As life slowly returns to normal, with more in-person interactions, investors are growing edgy about the future of zoom.

With inflation on the rise, the Federal Reserve increased interest rates. The move decreases the current value of expected cash flows.

Not all is lost

Zoom has been experiencing a slow-down, especially in growth. To remain at the top, the company has expanded its range of products.

The move aims to broaden the business and ease investors' fears. The two significant developments are;

  • • A cloud contact centre product
  • • A new model of internet-enabled technology to replace landlines

The developments seek to help businesses and workplaces, in general, improve meetings for both remote and in-office workers.

The stock is highly volatile, but the company consistently produces strong business results.

Additionally, the stock is more affordable, retailing at less than 268.1% less than its last 52-week high stock price of $406.48. The stock is retailing at $112.24 at the time of this writing.

During its peak revenue period of the pandemic, the Zoom stock price was so high as if its growth would never slow. On the 19th of October 2020, the stock closed at an all-time high of $568.34.

At the time, the high prices excited stakeholders and scared away potential investors. Today, the stock price is reasonable and stable.

The current price is suitable for a potential investor who believes in Zoom's business model and is optimistic about its future performance.

Determining factors

Revenue and Earnings of first-quarter fiscal 2023

  • • Revenue: $1,073.8 million
  • • GAAP income from operations: $187.1 million
  • • Non-GAAP income from operations: $399.6 million
  • • Cash flows from operating activities: $526,151.00
  • • Cash flows from investing activities: $42,334.00
  • • Cash flows from financing activities: $133,243.00

Unsurprisingly (compared to past trends), Zoom surpassed analysts' outlook estimates for the first quarter of fiscal 2023. The results gave profitability from the results of the last quarter.

The cash flow figures (fiscal 2022) have less and more balanced amounts than the fiscal year 2021. This shows that Zoom has adapted well to its decelerating growth by reducing costs.

In the current wake of rising inflation and interest rates, investors want tech company stocks that can produce optimal earnings while withstanding the high inflation and interest tide.

Capital Structure

A company's capital structure is critical in determining how a company utilizes debt and equity to fund its operations. For a profitable system, a company's capital should be liquid in the short term to handle operating costs.

Additionally, it should accommodate financial expansion without increasing long-term debt to an unsustainable level. I classify Zoom as having a conservative capital structure.

The debt to equity ratio for Zoom fiscal 2022 was 0.01. The company's highest debt to equity ratio over the past six years was 0.09.

The ratio shows that Zoom is not aggressive in financing its growth with debt. This is a good indication for the investors, as it proves good management. It also shows that the stocks are secure.

Conclusion

Revenue growth has slowed down for the video communication giant post-pandemic. However, we need to keep in mind that Zoom grew steadily before the pandemic.

It will be hard to analyze Zoom's growth based on its market performance compared to competitors instead of comparing it to its past glory (during the pandemic).

That would be the only way to picture the expected growth trajectory accurately.I would recommend a buy and hold on medium-term for Zoom.

The recommendation is based on their balanced financial reports over the years and good management.

I/we have a position in an asset mentioned

ZM, Buy

Zoom Video Commu...
Return: -36.19%

ZM, Buy

Return: -36.19%


Sound investments
don't happen alone

Find your crew, build teams, compete in VS MODE, and identify investment trends in our evergrowing investment ecosystem. You aren't on an island anymore, and our community is here to help you make informed decisions in a complex world.

More Reads
NVIDIA: ANALYSIS OF FINANCIAL RESULTS FOR FIRST QUARTER FISCAL 2023
Image

On May 25, 2022, Nvidia Corporation reported its first quarter fiscal 2023 earnings. The results beat stock analysts speculations especially based on the last quarter’s outlook.

Is Astra Space Inc Still a Buy After Their SpaceTech Day?
Image

Astra's SpaceTech day shed light on Astra's significant strides into space. But is it enough to invest in the company?

Is Astra Space Inc. (ASTR) a Buy Right Now?
Image

Astra Space Inc. is a space stock that could potentially be a big player as the space industry matures. But with the market falling, is it a good stock to consider right now?

Lockheed Martin is a Great Dividend and Space Stock
Image

Lockheed Martin has a dividend yield of 2.5% as of Q2 2022. Let's discuss how LMT has kept a healthy dividend as a leader in space and military technologies.

Is Roblox Still a Buy in Q2 2022?
Image

Is Roblox (RBLX) still a buy, a hold, or a sell? Let's take a look at Q1 2022 to see what's changed for Roblox.

F45 vs CrossFit
Image

Attached is an article excepted from Pretty Brave Fitness, a group training organization for girls, on the differences between F45 and CrossFit. It focuses on which program could be best for women/girls but the information can be useful to men as well (i.e. cardio vs strength training) to determine the best option for your fitness goals.

TL;DR GameStop recent Earnings Results
Image

Now that the dust has settled, how is our favorite meme stock doing?

The Cryptocurrency You Should Hold Forever
Image

These are the coins you should keep forever and the reasons why they are innovative

Resources for Publishers
Resources for New Investors
Boosted with BossCoin
Financial Literacy Leaders
user_profile
Tom Hamilton
user_profile
Wise Intelligent
user_profile
Mark Robertson
user_profile
Kevin Matthews II
user_profile
Akeiva Ellis
user_profile
Brendan Dale
user_profile
Kenneth Chavis IV
user_profile
Sharita Humphrey