Zoom Video Is a Buy Despite Its Drop From 2020 Highs

  • Zoom Video Communications (ZM) stock is down considerably from highs reached in 2020
  • However, ZM stock remains on solid financial ground and the company just revealed an important product
  • Investors should jump at the chance to buy Zoom shares at a discount
A magnifying glass zooms in on the ZoomInfo (ZI) logo

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Based in San Jose, California, Zoom Video Communications (NASDAQ:ZM) provides a well-known teleconferencing platform. ZM stock is a great investment even though the Covid-19 catalyst is now in the rearview mirror.

As you surely recall, teleconferencing became a red-hot market in 2020 due to the onset of the Covid-19 pandemic. That trend certainly benefited Zoom’s business, though the company must now prove its viability as some companies are requiring in-person meetings again.

The doubters might think of ZM stock as a has-been, but that’s the wrong way to look at the company. Sometimes Wall Street’s expectations are high and companies can’t live up to the hype — and when this puts negative pressure on stock prices, that’s how opportunities arise.

ZM Zoom Video Communications $124.28

What’s Happening with ZM Stock?

From March to October of 2020, ZM stock tripled from $150 to $450. It was astonishing to witness, but a pullback was practically inevitable as the Covid-19 crisis subsided.

Fast-forward to 2022, and Zoom’s trailing 12-month price-to-earnings (P/E) ratio is 28.1x. That’s quite reasonable, and the Zoom share price is quite attractive as it’s far below $150.

In other words, you basically have a chance to turn back the clock and buy ZM stock at the March 2020 price, or maybe even cheaper than that. Besides, it’s not as if people and businesses aren’t using Zoom. The platform remains quite popular and the company is now a household name.

Furthermore, it’s not as if Zoom just got lucky in 2020. The company has been around since 2011 and has constantly had to innovate and improve its platform offerings to stay competitive.

In a recent example of this innovative spirit, Zoom revealed an omnichannel contact center solution known as Zoom Contact Center. It’s ideal for customer service providers, and at launch, it “will have over 100 agent, supervisor, and contact center administrator features.”

In effect, Zoom Contact Center centralizes multiple communications tools, designed for customer service providers, into a central hub. Future iterations of the service are expected to include additional channels, as well as customer relations management (CRM) and workforce management integrations.

Is ZM Stock Good to Buy?

ZM stock is good to buy because the company is not only an inventor of great new products and services, but also a robust revenue generator.

Not everyone is impressed with Zoom’s financial performance, however. Analysts, according to Refinitiv, expected the company to earn $1.06 per share (adjusted) in 2021’s fourth quarter, but it actually saw $1.29 in earnings per share.

Those analysts also anticipated Zoom would generate $1.05 billion in Q4 2021 revenue, but the company beat that by reporting $1.1 billion.

This actual revenue figure represents a 21% year-over-year (YOY) increase — not too shabby. Clearly, Zoom can grow its revenues even if the 2020 Covid-19 catalyst doesn’t exist today.

Besides, when we extend the timeline, the fiscal picture gets even brighter. For the full fiscal year of 2022, Zoom’s total revenue was around $4.1 billion. This result signifies an impressive 55% YOY improvement.

What You Can Do Now

All in all, it’s safe to say Zoom is on the right financial track. Wall Street’s bottom-line expectations were high, and Zoom is quite profitable even if the analysts aren’t necessarily impressed.

Meanwhile, Zoom is working diligently to provide top-of-the-line products and services for businesses. Zoom Contact Center is an excellent example of how the company is tailoring its experiences to a variety of business segments.

In the final analysis, ZM stock is a strong buy irrespective of the analysts’ expectations. It’s perfectly fine to accumulate some shares at the current price and hold them for the long term.

On the date of publication, David Moadel 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.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.


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