Zoom Video Communications (ZM) — What You Need to Know in 2023

Zoom Video Communications Inc. (ZM) - Reasonably Priced With Adequate Growth Factors

Zoom Video Communications shares moved -63.0% over the last 52 weeks, with a high of $191.61 and a low of $63.55. During this time, the stock lagged the S&P 500 index by -43.8%. As of January 2022, the company's 50-day average price is $76.18. Zoom Video Communications, Inc. provides unified communications platform in the Americas, the Asia Pacific, Europe, the Middle East, and Africa. The large-cap Technology company has 8,422 full time employees and is based in San Jose, CA. Zoom Video Communications has not offered any dividends in the last year.

Growing Revenues With Increasing Reinvestment in the Business:

2019-01-31 2020-01-31 2021-01-31 2022-01-31
Revenue (MM) $331 $623 $2,651 $4,100
Revenue Growth n/a 88.39% 325.81% 54.63%
Gross Margins 81.5% 81.5% 69.0% 74.3%
Gross Margins Growth n/a 0.0% -15.34% 7.68%
Operating Margins 1.9% 2.0% 24.9% 25.9%
Operating Margins Growth n/a 5.26% 1145.0% 4.02%
Earnings Per Share $0.0 $0.09 $2.25 $4.5
EPS Growth n/a inf% 2400.0% 100.0%
Free Cash Flow (MM) $21 $114 $1,385 $1,460
FCF Growth n/a 444.33% 1118.79% 5.36%
Capital Expenditures (MM) -$30 -$38 -$86 -$146
Net Debt / EBITDA -4.83 -7.23 -3.1 -0.9

A Lower P/B Ratio Than Its Sector Average but Trades Above Its Graham Number:

Compared to the Technology sector's average of 26.5, Zoom Video Communications has a trailing twelve month price to earnings (P/E) ratio of 29.8 and, based on its EPS guidance of 3.62, an expected P/E ratio of 18.8.

The firm's price to earnings growth (PEG) is -1.59, which tells us that the company is expected to have negative growth in the future.

Zoom Video Communications is undervalued in terms of its assets because its price to book (P/B) ratio is 3.5 compared to its sector average of 5.57. As of the date of publication, the company's shares are trading 114.0% above their fair value as expressed by Benjamin Graham's formula:

√(22.5 * TTM earnings per share * book value per share) = √(22.5 * 2.28 * 19.69) = $31.78

Zoom Video Communications Has an Average Rating of Hold and an Analyst Consensus of Strong Upside Potential:

30 analysts are following Zoom Video Communications and have set target prices ranging from $67 to $110 per share. On average, they have given the company a rating of hold. At the current price of $68, ZM is trading -21.86% away from its average analyst target price of $87.02 per share, implying an analyst consensus of strong upside potential for the stock.

The company has an average amount of shares sold short since 5.5% of the company's shares are tied to short positions. Institutions own 65.4% of Zoom Video Communications's shares, while the insider ownership rate stands at 12.57%. The biggest shareholder is the Vanguard Group, Inc. with a 7% stake in the company worth approximately $1,164,500,272.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.