Zoom Video Communications (ZM 2.34%) rewarded shareholders who bought the stock prior to the pandemic, returning 391% in 2020. The company was a clear beneficiary of the work-from-home environment, a trend that is still very evident today. Bureau of Labor statistics released in January, 11% of workers were still teleworking as of December 2021. Research and a sense of your overall portfolio can help you decide how much money to invest in Zoom. So, too, might your opinion on how long people will continue to work and dial in from home. During that period, its net income of $339 million surged 63% higher.

Should You Buy Zoom Stock Today?

Zoom makes up almost 7% of its flagship fund, the Ark Innovation ETF, making the Cathie Wood investment its fourth-largest holding. Across all Ark Invest funds, Zoom makes up around 4.5% of the company’s holdings. For a company like Zoom that has been so tied in investors’ minds to the pandemic, it can be difficult to take a step back and see the forest for the trees.

Is it time to buy Zoom?

• For that period, the company reported net income of $672.3 million on revenue of $2.7 billion.
• To buy Zoom stock, you’re going to need a brokerage account.
• Spend some face time with Zoom’s most recent annual report as well as its S-1 filing, both available on its investor relations website.
• To make the decision even easier, Zoom is trading at or near its low for price-to-earnings (P/E) and price-to-sales (P/S) ratios.

Still, operating income fell during that period, and much of the gain came from $114 million in “other income,” which consists of income from interest, foreign currency, and marketable securities. Unfortunately for Zoom bulls, that “increase” is likely a one-time event. Between the AI tool and its expected growth in hybrid and remote knowledge workers, Ark Invest believes Zoom’s average revenue per user (ARPU) will grow by 26% yearly.

Taken without the noise of the past two years, Zoom is clearly a buy for existing shareholders or those investors looking to start a position. Zoom ended the last quarter with $5.4 billion in cash, cash equivalents, and marketable securities and only $97 million in debt. To that end, Zoom has recently introduced Zoom Phone, Zoom Meetings, Zoom Video Webinars, and Zoom for Home.

Select to analyze similar companies using key performance metrics; select up to 4 stocks. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Luke Meindl has no position in any of the companies mentioned.The Motley Fool owns and recommends Alphabet (A shares), Cisco Systems, Microsoft, and Zoom Video Communications.

Is Zoom Video Communications Stock a Buy?

In other words, all the things that can help investors determine if Zoom is a worthy addition to their portfolio. Its forward price-to-earnings (P/E) ratio is just under 14, and the price-to-sales (P/S) ratio of less than 5 is just above all-time lows. That valuation positions the stock for a massive surge if the company can stoke a recovery in revenue growth. Zoom Video Communications Inc. (ZM) offers a video-first communications platform used by millions of people worldwide for both business and personal use. The platform connects people via video, phone, chat, and content sharing and can be integrated across a broad range of devices. As a long-term investor, I don’t ignore past performance, but I’m generally more interested in where the company is heading.

A general guideline for investors is to spread money across different companies, industries and geographies, thereby reducing risk and exposure to any one stock’s sudden movements. You’ll need to add money to the account and then search for “ZM” within the brokerage’s platform. This may influence which review when genius failed products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research.

As of Aug. 23, 2021, Zoom had 240,744,533 outstanding shares of Class A common stock and 56,383,369 outstanding shares of Class B common stock. As mentioned above, on Sept. 30, 2021, Five9 announced that the two parties had mutually agreed to abandon the deal. The company said that the agreement had not received the required number of votes from Five9 shareholders to approve the merger. Earlier in forex broker September, The Wall Street Journal reported that a U.S.

For better or worse, Zoom has become synonymous with the pandemic. Its rise to prominence and the resulting performance were tied to a massive need for video communications at the height of lockdowns. This demand pulled forward a ton of growth and warped some investors’ views of the company’s fundamentals. Zoom’s cloud-based service allows people in different locations with different devices to connect face-to-face and share content via video, voice and chat. And in the COVID pandemic, people increasingly turned to the service as the work-from-home era stretched on. Zoom Video Communications Inc ZM shares are trading lower on the heels of the company’s third-quarter financial results.

ZM price to earnings (PE)

The stock is off the lows of the session as analysts lift price targets following the print. Zoom is a member of the information technology sector and operates within the software industry. They include legacy web-based meeting service providers such as Cisco Systems Inc.’s (CSCO) WebEx and LogMeIn Inc.’s GoToMeeting.

Zoom shares have lost over 60% of their value in the past six months as part of a broader tech sell-off in response to rising interest rates and inflation. Revenue and earnings growth remain strong — analysts are forecasting revenue and earnings per share to grow by 54% and 46% year over year up to $4.1 billion and $4.87 per share in fiscal year 2022, respectively. Zoom has almost no debt, boasting a debt-to-equity ratio of 2% and a strong cash position of $1.3 billion. The company also grew free cash flow by over 1,100% in fiscal year 2021 up to $1.4 billion. The significant climb in free cash flow was a result of superb revenue growth stemming from pandemic-driven demand.

Looking back at the last two years, there may be no stock more representative of the pandemic’s impact on the stock market than Zoom Video Communications (ZM 2.34%). After growing parabolically in 2020, the stock has come crashing back to earth and is down 45% year to date at the time of python exponential this writing. This is especially stark when compared to the S&P 500, which is up 27% on the year.