Today, investors in Zoom (NASDAQ:ZM) and ZM stock certainly have a lot to digest. Indeed, the company’s announcement yesterday of the acquisition of Five9 (NASDAQ:FIVN) for $14.7 billion is a big deal.
Shares of ZM stock are currently trading down approximately 5% on this news. Indeed, following any acquisition involving a premium, such a decline can be expected. However, for long-term investors assessing the quality of this deal, questions remain. Some may wonder whether this is truly a solid long-term move by Zoom. Perhaps more importantly, the question of whether this acquisition will take Zoom over the hump in terms of the company’s growth prospects remains to be seen.
FIVN stock is currently tracking the inverse of Zoom. Shares of Five9 are approximately 5% higher after the acquisition priced in a 13% premium to Five9’s closing price on Friday.
Let’s dive into some of the details of this deal investors may want to know about.
Will ZM Stock Take Off Following the Company’s Five9 Acquisition?
On Sunday, Zoom announced its first ever multi-billion dollar acquisition. Indeed, the near-$15-billion price tag for Five9 makes this a considerable deal. This is also one of the largest acquisitions of 2021 thus far.
The company noted in its press release that “the combination of Zoom’s robust communications platform with Five9’s intelligent cloud contact center will enable organizations to reimagine the way they engage with their customers.” Accordingly, ZM stock investors are invited to consider the impact this deal will have in terms of adding value to the customer experience. While hard to quantify, apparently Zoom’s management team has put a price on this. A 13% premium and a $14.7 billion price tag certainly appears to be significant.
Cloud services companies have seen valuations balloon this year. Accordingly, should growth stocks once again take off, it’s possible this deal could be viewed favorably in a few quarters’ time. However, for now, it appears investors are still digesting the value Five9 brings to the table when it comes to Zoom’s business model.
Investors largely expect Zoom’s growth rate to slow in the quarters to come. A return to normal means more folks back in offices having in-person meetings. Thus, enhancing the customer experience appears to be one way Zoom is looking to build out its moat and continue to grow.
For now, investors appear to remain wary of the synergies this deal brings. How much value will be added long-term remains key. Accordingly, investors may expect some volatility on the horizon with this stock.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.