The one area of modest strength is non-GAAP (adjusted) free cash flow, which increased almost 14% yearly to more than $1.1 billion in the first three quarters of 2023. That was not enough to persuade investors to buy Zoom stock, as it is up just 1% from year-ago levels. Zoom’s latest fiscal year (FY) was FY 2021, which ended Jan. 31, 2021. For that period, the company reported net income of $672.3 million on revenue of $2.7 billion.

The platform connects people via video, phone, chat, and content sharing and can be integrated across a broad range of devices. On the earnings front, Wall Street analysts are forecasting an average annualized growth Theory of reflexivity of 28% over the next five years up to an earnings per share of $6.21 per share in fiscal year 2026. This is more favorable than Zoom’s expected top-line scenario, but many investors still might be hesitant to pay a lofty valuation for the company when taking into account the deceleration in growth. For the current fiscal year, the consensus earnings estimate of $5.34 points to a change of +2.5% from the prior year. For the current quarter, Zoom Video is expected to post earnings of $1.31 per share, indicating a change of +1.6% from the year-ago quarter.

1. 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.
2. 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.
3. Zoom has the balance sheet to do this and has been very active in rolling out new products.

More importantly, the growth in larger customers — those with more than 10 employees and those spending more than $100,000 in revenue — provides a large base to upsell new features and bitbucket push and pull request hardware options as Zoom’s offerings expand. 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 5.03%). After growing parabolically in 2020, the stock has come crashing back to earth and is down 45% year to date at the time of this writing. This is especially stark when compared to the S&P 500, which is up 27% on the year.

Has Zoom (ZM) ever split its stock?

The slowdown in growth, combined with ongoing macroeconomic headwinds and geopolitical concerns, will put additional downward pressure on Zoom’s valuation for the foreseeable future. There is one caveat worth mentioning — Zoom’s growth in the coming years is expected to let up significantly from current levels. As the pandemic unwinds and Zoom becomes a more mature company, it’s inevitable that sales growth will come down from its all-time highs. Analysts are forecasting Zoom’s revenue to come in at $7.7 billion in fiscal year 2026, indicating an average annualized growth of 13% from 2022 estimates.

Cash flow

Zoom makes up almost 7% of its flagship fund, the Ark Innovation ETF, making the Cathie Wood the commitments of traders bible investment its fourth-largest holding. Across all Ark Invest funds, Zoom makes up around 4.5% of the company’s holdings. Still, the bear estimate calls for a $700-per-share or less stock price, amounting to more than a 10-fold gain from current levels if that price target holds. And yet the business performed solidly throughout the past few years even as the stock fell.

The company was incorporated in 2011 and is headquartered in San Jose, California. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation.

Today, Zoom is trading at 31.6 times earnings, whereas top competitors like Cisco (CSCO 1.47%), Microsoft (MSFT 0.10%), and Alphabet (GOOGL -1.91%) (GOOG -1.79%) are trading at price-to-earnings multiples of 20, 31, and 24, respectively. Given the expected slowdown in Zoom’s growth, I think it’s safe to say that the company is still trading at expensive valuation multiples. 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.

Should You Buy Zoom Stock Today?

That mascot character is Eliza, an open-source framework for AI characters that can interact with people on social media. On Tuesday, Shaw “set her free” and endorsed the new ELIZA token, whose sanctioned creators have pledged to give a valuable chunk to ai16z’s treasury. The facts discussed here and much other information on Zacks.com might help determine whether or not it’s worthwhile paying attention to the market buzz about Zoom Video. However, its Zacks Rank #2 does suggest that it may outperform the broader market in the near term.

Zoom Video Communications (ZM 4.88%) is a bit of a mystery as a growth stock. The company is headquartered in San Jose, Calif., and has additional offices in more than 15 locations in the United States, Europe, Asia, and Australia.