Key points
- Zoom Video shares recently hit new 52-week lows at $59.01, creating a potential value opportunity.
- Zoom Video has $7 billion in cash, representing nearly 40% of its market capitalization.
- Zoom Video stock was upgraded to Buy with a $75 price target by Rosenblatt Securities, citing the combination of a refocused channel strategy, Zoom Phone momentum, improving contact center-as-a-service market (CCaaS), a healthy balance sheet, and the $1.5 billion Stock Repurchase Program.
- 5 stocks we prefer to Zoom Video Communications
Zoom Video Communications Inc. NASDAQ:ZM stocks hit a new 52-week low, despite improvements indicating that normalization may be close to completing its activities. Zoom stock has been a pandemic-era favorite, hitting a high of $588.84 in October 2024 as the entire world went virtual during global lockdowns. Zoom has become a household name and even a verb to describe engaging in video conferences, visits and meetings. It has become a fixture in the remote and hybrid work segment. The macro market sell-off accelerated sales in Zoom Video.
It is evident that people are making fewer Zoom calls for social engagements, but markets care more if normalization is over and growth resumes in the enterprise segment. Investors are left wondering whether Zoom shares are getting too cheap to pass up.
Zoom competes with computing and technology giants such as Microsoft Co. NASDAQ: MSFT Teams, Salesforce Inc. New York Stock Exchange: CRM, AND Adobe Inc. NASDAQ: ADBE.
The evolution of artificial intelligence integration
Zoom is mostly known for its video conferencing app and software. What originally started as a video conferencing platform has evolved into a complete work communication and collaboration ecosystem. Its Zoom Workplace is an AI-powered collaboration platform that includes meetings, group chats, scheduling, whiteboarding, and spaces. He formed a partnership with Avaya Holdings Co. NYSE:AVYA to be integrated with its Communication and Collaboration Suite.
Virtual Agent is an AI-powered feature in its Contact Center offering. Virtual Agent has helped save over 400,000 agent hours per month. Generative AI is used to generate meeting notes, summaries and transcription services. Its AI also offers non-verbal signal detection and speaker identification.
Daily pattern of the descending triangle
ZM has a descending triangle breakout pattern on its daily candlestick chart. The daily descending trendline formed at $70.60 on March 12, 2024. The flat lower trendline is at $60.14. As the stock approaches the peak point, ZM is falling below the flat-bottomed trend line. The daily trigger market structure low (MSL) forms a breakout above $60.75. The daily relative strength index (RSI) is flat around the 30 band. The pullback support levels are at $59.01, $57.52, $54.56, and $51.12.
Impressive fiscal balance sheet in the fourth quarter of 2024
Zoom on video communications
(As of 04/24/2024 ET)
- 52 week interval
- $58.87
▼
$75.90
- P/E ratio
- 30.22
- Price target
- $77.56
The days of Zoom’s torrid 325% growth during the pandemic era are over. Investors will have to make do with the 2.6% year-over-year growth achieved in the fiscal fourth quarter of 2024. Revenues of $1.15 billion still beat consensus estimates of $1.13 billion. Zoom has returned to profitability. Its GAAP revenue rose to $168.5 million in the quarter compared to the prior-year quarter’s loss of $129.9 million. EPS performance of $1.42 beat consensus estimates by 27 cents.
Enterprise business increased 5% year-over-year in the quarter, bringing Zoom’s year-end total enterprise customers to 220,400. Customers with a contract value of $100,000 or more increased 9.8% year over year to 3,810 in the quarter. Zoom ended the fiscal year with $7 billion in cash, or nearly 40% of its market capitalization. They also authorized a $1.5 billion share buyback.
EPS estimates increased
Zoom Video raised full-year fiscal 2025 EPS from $4.85 to $4.88, beating consensus estimates of $4.66. For the first fiscal quarter of 2025, revenues are expected to be around $1.125 billion.
Growth in the phone
Zoom Video CFO Kelly Steckelberg noted its growth in Zoom Phone at the KeyBanc Emerging Technology Conference. Steckelberg commented, “And by the way, now with the advent of artificial intelligence, one of the features that you’ll get with the Zoom AI companion is call summaries. So if you have a phone call, you can get a summary of it just like you can get a summary of the meeting. The innovation that will happen with artificial intelligence will not happen with local suppliers.
Rosenblatt update
On April 18, 2024, Rosenblatt Securities upgraded shares of Zoom Communications to Buy from Neutral with a $75 price target. Analyst Catherine Trebnick noted that the upgrade factored in a refocused channel strategy, momentum in the market Zoom Phone and contact center-as-a-service (CCaaS), a healthy balance sheet, and a $1.5 billion stock buyback.
Zoom Video Communications analyst ratings and price targets I’m on MarketBeat.
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