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Zoom Video Communications is a California-based communications technology company that was a pandemic darling. The company became a household name when people were locked up in their respective houses and Zoom was one of the primary tools that helped them connect with each other. But over the past two years, the company has been unable to maintain its pace of three-digit growth. Its stock has lost more than 67% of its value over the last year and is currently trading at its cheapest valuation since the time it went public. But this Zoom stock analysis for 2022 might make you realize that it’s not a wise idea to sell this stock at present.
Currently, the Zoom stock chart might seem scary to the investors but they should realize that it is not only Zoom that is suffering these days. Even the iShares S&P 500 Growth ETF has fallen 24% so far this year. Moreover, considering Zoom’s present plans and strategies it seems the company’s path ahead shows a lot of promise.
Zoom Stock Analysis 2022: Will the Beaten-down Stock Rise Up Again?
Zoom Stock Analysis
Encouraging Quarter Report
Zoom came out with its First Quarter Fiscal Year 2023 reports just a few days back which were quite impressive. The company had added over 2,916 customers who spend at least $100,000 annually. This is 46% higher than what it had a year ago. Also, by the end of April, it had nearly 200,000 enterprise customers which are 24% higher than last year. All these customers are eager for the company’s add-on services too, and therefore, Zoom’s net dollar expansion rate for enterprise customers jumped up to a whopping 123% over the past year.
Besides, Zoom’s revenue had increased by 12% to $1.07 billion for the period ending April 30 even though the number of virtual meetings being conducted these days is far lesser because only a handful of people are working or taking classes from home these days. Also, one of the most astonishing facts about this company is that it has grown its revenue to the extent of 635 % over the past three years. Moreover, despite facing tough times Zoom’s free cash flow had increased by 10% to an impressive $501 million translating to around 47% of its current revenue.
However, in spite of the revenue increment, a reduction in the income levels was noticed. Zoom’s non-GAAP income from operations came at $399.6 million representing a non-GAAP operating margin of 37.2% compared to last year’s operating income of $400.9 million.
Also, Non-GAAP net income for the first quarter came at $315.8 million translating to a per-share income of $1.03 compared to last year’s net income of $402.1 million, or $1.32 per share. This might be because of the increased levels of stock-based compensation expenses and other acquisition-related expenses the company is making to evolve itself as per current market conditions.
Zoom stock forecast for the current quarter is also pretty decent. The company expects to generate revenue between $1.115 billion and $1.120 billion and earnings per share in the range of $0.90 and $0.92 for the Second Quarter of Fiscal Year 2023.
More Than Just Video Conferencing
Innovation is the key to every organization’s success. Zoom has been continuously working towards innovation and has been improving its offerings in a manner so as to become an undisputed leader in the communications space. Most people are already familiar with the Zoom app that is used for holding virtual meetings but they are not aware of how valuable the company’s newly launched other communications services are especially for the enterprise customers.
Zoom’s newly launched contact center offering has a lot of potential. The said product provides an opportunity for enterprise clients to automate as many calls as they want by employing conversational artificial intelligence. Further, to boost the product’s efficiency the company also acquired Solvay.
Because of this, enterprises that want to provide first-rate customer service in their businesses will no longer have to maintain their own contact centers and will be able to address a larger base of customer concerns while employing a much lighter workforce. This product has become quite a hit amongst organizations and the company has already signed contact center details with Humana, a major US health insurer with 17 million members and Avis, a rental car giant.
Further, Zoom has also launched Zoom Whiteboard and Zoom IQ for Sales. The Zoom Whiteboard will let the users share a whiteboard that all the participants will be able to use to annotate while the Zoom IQ for sales is a conversational intelligence platform for the sales teams within an organization to help them close deals at a faster pace.
The Zoom Phone is another unified communication application that combines messaging features and phone calling features with the video calling feature. By using this, organizations will be able to keep track of the ways by which their employees communicate with their customers whether the mode of communication has been through text, audio, or video. Though Zoom Phone didn’t launch until 2019, the enterprise customers are already paying for its subscriptions covering about 3 million individual employees. Zoom stock has a lot of potential and currently, it looks like one of the best beaten-down stocks that are worth buying.
The stock closed at $110.42 on Mat 27. Analysts have given an average target price of $176.34 for Zoom. That’s an upside of almost 60% from current levels.
It is true that the company might not experience another huge growth spurt as it did back in 2020, but considering the number of loyal clients sticking around and expanding their relationships with the company, it seems Zoom will be able to deliver market-beating gains again to its investors in the coming days. Therefore, according to our Zoom stock analysis, it will not be a bad idea to add Zoom to your portfolio before the stock starts rallying once again.