Can I buy Zoom stock? Yes! Zoom trades under the ticker symbol ZM. They went public with an IPO in April 2019. They had their biggest year in 2020, with all the work-from-home happening. Many of us went and still do go to Zoom meetings for work.
Zoom Video Communications, Inc. (ZM) is a communications technology company Eric Yuan founded on April 21, 2011. Zoom provides a platform that allows users to connect through video, audio, phone, and chat.
It enables users to conduct virtual meetings, collaborate, and communicate remotely using supported devices and an internet connection. With Zoom, users can host secure video conference calls with high-definition video and audio features, screen sharing, annotation, and more.
Zoom has gained significant popularity, especially during the COVID-19 pandemic. It has become widely used for remote work, online education, and virtual social interactions.
When Did Zoom Go Public?
Zoom Video Communications went public on April 18, 2019, with an initial public offering (IPO) price of \$36 per share. Since going public, the stock has experienced significant growth. For example, on October 19, 2020, Zoom reached its all-time high closing price of \$568.34
Zoom Stock Price Zoomed to the Moon During the Pandemic
The company’s revenues rose 88.3% in fiscal year 2020, followed by a 325% rise the following year. Like other stay-at-home winners whose businesses blossomed during the pandemic, Zoom effectively benefited from the restrictions on people’s physical movement.
However, the revenue growth slowed to 54.4% in the next year and decelerated even further to 7.1% in the fiscal year 2023. In the fiscal year 2024 (ended January 31), Zoom’s revenue rose a mere 3.1%. In the fiscal fourth quarter, revenues rose by a dismal 2.6%.
Zoom Is Not Immune to Layoffs in the Tech Sector
On February 1, Zoom Video said it would cut most of its workforce, about 150 jobs. This was on top of 15% of its workforce in 2023. This comes as no surprise, as layoffs in the U.S. tech sector reached all-time highs in January. Essentially, fewer people in seats means fewer people using Zoom for meetings.
Furthermore, Zoom’s average contract length with companies is about three years. Many were up for renewal during the company’s fiscal year 2024, which ended in January. Since many of their customers reduced their employee base, they didn’t renew their contracts.
What Is Happening With Zoom Stock in 2024?
Unfortunately, growth has been nonexistent in 2024. So far, ZM stock has retreated 6%. Additionally, revenue in its fiscal 2024 third quarter was only up 3.1% year over year.
However, it’s not all doom and gloom.
Zoom Is a Free Cash Flow Engine
During the fiscal year 2024, Zoom reported a net income of $637.5 million. For those of you watching Zoom stock closely, the net income was over sixfold compared to 2023. For the current fiscal year, the company forecast adjusted earnings per share (EPS) between \$4.85 and \$4.88, compared to \$4.37 in the previous year. Even though Zoom’s growth has slowed, its bottom-line performance has been impressive.
Even more remarkable has been its cash flow, as Zoom generated free cash flows of $1.47 billion in the last fiscal year—up 24.1% YoY. For the current fiscal year, the company expects free cash flows between $1.44 billion and $1.48 billion.
Thanks to the stellar free cash flow generation over the last several quarters, Zoom had cash and cash equivalents of $7 billion at the end of January, with no long-term debt on its balance sheet. For context, the cash on Zoom’s balance sheet is more than a third of its current market cap.
Zoom Video Communications has announced a share buyback program for several reasons. Firstly, the company delivered better-than-expected results. The share buyback announcement, set to repurchase up to \$1.5 billion shares, reflects confidence in the company’s value and financial strength.
Additionally, Zoom is looking to improve its financials and address its previous growth struggles. As mentioned above, Zoom’s revenue increase in 2023 was only 3%. The share buyback could help drive shareholder value by boosting earnings per share and signaling management’s belief in the company’s prospects.
Zoom Stock Q4 Earnings Report
Zoom’s stock price jumped 8% on February 27 after the company posted its latest earnings report. Zoom’s earnings for the quarter ending January 31 were 1.42 per share on an a from a year earlier. Revenue rose 2.6% to $1.146 billion.
For the fourth quarter of fiscal 2024, which ended on January 31, its revenue rose 3% yearly to $1.15 billion and beat analysts’ estimates by $20 million. Its adjusted EPS grew 16% yearly to $1.42 and cleared the consensus forecast by $0.27 per share.
What Is the Outlook for Zoom Stock in 2025?
For fiscal 2025, Zoom said it expects earnings of $4.86 per share at the midpoint of its outlook vs. estimates of $4.66 per share. The company expects roughly \$4.6 billion in revenue vs. estimates of \$4.637 billion.
Is Zoom Stock a Buy Right Now?
According to Investor’s Business Daily Composite Rating, Zoom stock holds a rating of 73 out of 99. Further, they have an IBD Relative Strength Rating of 25 out of a best-possible 99. The best growth stocks have a Composite Rating of 90 or better.
Zoom stock holds an accumulation/distribution rating of B. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. Its current rating indicates more funds are bought than sold.
What Is the IBD Composite Rating?
The IBD Composite Rating, or the Investor’s Business Daily Composite Rating, is a proprietary rating system developed by Investor’s Business Daily (IBD) to assess a stock’s overall strength and quality. It combines several key fundamental and technical factors to give investors a quick snapshot of a stock’s potential.
The Composite Rating considers various factors, including earnings per share (EPS) growth, sales growth, profit margins, return on equity (ROE), and relative price strength. These factors are weighted and combined into a single rating ranging from 1 to 99, with 99 being the highest possible rating.
A high composite rating indicates that a stock has strong fundamentals and technicals compared to other stocks in the market. The IBD is used to identify leading stocks with the potential for strong price performance. However, it is essential to note that a high Composite Rating does not guarantee future success, and investors should conduct thorough research and analysis before making investment decisions.
Zoom Stock Key Takeaways
- Zoom’s Q4 earnings exceeded analysts’ expectations. During the fiscal year 2024, Zoom reported a net income of $637.5 million.
- Institutional investors own over 50% of the company.
- The all-time high Zoom Video Communications stock closing price was 568.34 on October 19, 2020
- Zoom has a market capitalization of $20.370B
- Zoom is free-cash-flow positive, with around $6.5 billion of cash and equivalents on its balance sheet.
- The company had $7 billion on its balance sheet as of January 31
Who Owns Most Zoom Stock?
The largest shareholders of Zoom Video Communications, Inc. are institutional investors. Vanguard Group, BlackRock, ARK Investment Management LLC, Baillie Gifford & Co., and Renaissance Technologies LLC are the major institutional shareholders, each holding over 3% of the outstanding shares.
In terms of individual shareholders, Bin Yuan and Cathy Wang, who are trustees of a trust that owns a significant amount of Zoom’s shares, are also among the largest shareholders of the company. Erik Yuan, the founder, major shareholder, and CEO of Zoom Video Communications
The largest shareholder is the CEO Eric Yuan, who has 9.4% of the shares outstanding. In comparison, the second and third largest shareholders hold about 7.5% and 4.6% of the stock.
Is There a Silver Lining for Zoom Stock?
The good news for Zoom is that its business is quite healthy. As of its fiscal Q3, the company had about 220,000 enterprise customers, up 5% year over year. Customers spending $100,000 or more annually jumped a more impressive 14% to over 3,700. Therefore, it’s not as though Zoom is losing customers; revenue is still at an all-time high.
Zoom’s growth has stalled because its existing customers have downsized, and consequently, it doesn’t need as much from the company. The additional silver lining is that Zoom does have other products to offer customers. If it weren’t for the availability of these other products, Zoom’s revenue might have fallen by now.
Frequently Asked Questions
According to TipRanks, Zoom Stock has 7 Buy Ratings, 21 Hold Ratings, and 3 Sell Ratings.
The most recent long-range prediction suggests that by the conclusion of 2024, the value of Zoom Video will reach $70, followed by a rise to $80 by the conclusion of 2026.
The highest closing stock price for Zoom Video Communications, Inc. was $568.34 on October 19, 2020
The largest individual shareholder is CEO Eric Yuan, with 9.4% of shares outstanding.
