Now, as of early 2022, Zoom software has been installed more than 500 million times. In the early days of Covid ( April 2020), Zoom announced having achieved a milestone of 300 million daily meeting participants. The company was founded in 2011 by CEO Eric Yuan and has seen truly astonishing growth in the past year, which accelerated during the Covid-19 lockdowns. Zoom’s cloud-based communication platform is designed for multiple devices and connects people through video, voice, chat, and content sharing. Zoom is a software company and one of the leaders in video communication solutions. My findings conclude that Zoom-despite the sell-off-is still about 35% overvalued. In this article I take a close look at Zooms financials, and I structure a Residual Earnings framework to value the company’s shares. This is in line with my personal valuation. Currently trading at one-year forward P/E of about x27, I see a downward correction to x20 as fair-which would imply about 27% downside. Accordingly, the company’s earnings multiple should contract. Growing revenues at a rate of less than 10% year over year, which is below the performance of most tech stocks, Based on the recent results, it seems that Zoom may not be able to maintain its status of the growth company. The market’s first reaction is perfectly justified, I argue. Zoom ( NASDAQ: ZM) reported earnings for the June quarter on August 22, and the stock plunged by more than 8% following the announcement (after hours reference).
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