Why Zoom Is Still A Buy

Core Viewpoint - Zoom Video Communications, Inc. has experienced significant volatility in its stock price, with a peak during the COVID-19 pandemic followed by a substantial decline, but recent trends suggest a potential long-term recovery and growth opportunity for the company. Financial Performance - Zoom's stock peaked at around $575 in 2020, appreciating tenfold within a year, but subsequently fell by 90% to approximately $60, resulting in a market cap reduction from over $150 billion to about $20 billion [1][2] - Recent Q1 earnings showed an EPS of $1.35, beating estimates by $0.16, and revenue of $1.14 billion, a 2.7% year-over-year increase [9] - The company reported an operating cash flow of $588 million, reflecting a 40.6% year-over-year increase [10] Valuation Metrics - Zoom's current price-to-earnings (P/E) ratio is around 12, significantly lower than its previous valuation of 260 during its peak [4] - The enterprise value is approximately $12 billion, equating to about three times sales, indicating a low valuation compared to its market position [10] Growth Potential - Analysts expect Zoom to continue surpassing EPS estimates, with a potential EPS of around $5.82 this year and $6 next year, suggesting a forward P/E of only about ten times [16][20] - The company has authorized a $1.5 billion buyback program, which could further enhance EPS and stock price [20] Market Position and Brand Strength - Zoom is recognized as a market leader in the online meeting space, akin to Coca-Cola in beverages and Google in search engines, which positions it well for future growth [12] - The introduction of the "Zoom AI Companion" aims to enhance user experience and productivity, potentially driving further growth and profitability [17][18] Future Projections - Revenue projections for fiscal 2025 are estimated between $4.61 billion and $4.62 billion, with modest growth expected in subsequent years [10][21] - Analysts predict that Zoom's stock price could triple by 2030, driven by better-than-expected sales and earnings growth [22]