Zoom is also gaining traction with large enterprises with its Zoom Phone offering. Most importantly, the company looks like it is continuing to gain traction with enterprise customers - customers with over $100,000 in trailing-12-month revenue increased by 37% year over year. It's never a good idea to buy a stock just because it could get acquired, but this illustrates the optionality that Zoom has ahead of it.
With a market cap of about $25 billion, Zoom looks like a much more palatable investment now and could even become an acquisition target for a larger company in the software space. Zoom trades at about seven times sales, which isn't unreasonable for a software stock that has been growing like Zoom.Ī year ago, at the end of August 2021, Zoom had a market cap of over $100 billion. In addition to this strong cash position, Zoom has a strong balance sheet with no long-term debt. Shares are even cheaper than they look at first glance when you account for the fact that the company has $18.51 of cash per share on its balance sheet, meaning that nearly a quarter of the company's market value is in cash. While this isn't exactly cheap from a traditional value investing perspective, it isn't egregiously expensive and is far below the levels it traded at during the pandemic. value stock?!Īfter the sell-off, Zoom now trades at a price-to-earnings multiple of 24. But here's why the market looks like it is too bearish on Zoom. The company reported single-digit revenue growth for the first time since 2019 and missed consensus analyst estimates for the first time since going public. Shares plunged 15% after the company reported slowing growth and lowered its guidance during its second-quarter earnings, and the stock is now down 77% from its 52-week high of $357.93. But just like the market got overly exuberant about Zoom then, the pendulum seems to have swung too far in the other direction and the market now seems too bearish on Zoom. In hindsight, shares of Zoom got way too frothy and the pendulum clearly swung too far in the bullish direction for many of these work-from-home stocks during that unprecedented time. At one point, Zoom had a bigger market cap than Exxon Mobil, one of the world's largest energy companies, and a higher market valuation than the world's seven largest airlines put together. Zoom is perhaps the poster child for the "work from home" stocks that surged to unprecedented heights during the height of the COVID-19 pandemic. I never expected to say this, but shares of Zoom Video Communications ( ZM -1.18%) are starting to look like a good value, if not a downright bargain.