One way or another, it is safe to say that Microsoft continues to close the gap and is gaining on Zoom. Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing. Zoom Video has built up alliances with the likes of Salesforce.com (CRM), Atlassian (TEAM) and Box (BOX). Salesforce.com invested in Zoom stock prior to its initial public offering and reaped big gains.
Remarkably, as of the end of 2022, the company holds a very significant market share of 55% in the industry, far ahead of its closest peer, Microsoft, at 21%. However, I do not view the market share as anywhere close to sustainable. Ark Invest has backed estimates up by taking a significant position in the media stock. Zoom makes up almost 7% of its flagship fund, the Ark Innovation ETF, making the Cathie Wood investment its fourth-largest holding. Across all Ark Invest funds, Zoom makes up around 4.5% of the company’s holdings.
Zoom Video Communications Inc. (ZM) offers a video-first communications platform used by millions of people worldwide for both business and personal use. The platform connects people via video, phone, chat, and content sharing and can be integrated across a broad range of devices. However, this does not mean all weaknesses have disappeared, with the company still losing market share and continuously diluting its shareholders. Including SBC, the company can still barely report a profit with a GAAP net income margin of just 10%, which raises concerns. For a company that has entered a relatively mature stage with no rapid growth expected over the next decade, this kind of profitability and SBC is simply unacceptable to me as it barely makes a real profit and massively dilutes its shareholders.
With this software being used by millions of individuals, governments, institutions, and businesses worldwide, this gives Microsoft a very powerful advantage, one Zoom can’t fight or match. Whereas Zoom offered the best platform during the pandemic thanks to its head start, focusing how to invest money in 5 simple steps on simplicity and meeting features, competition has caught up, with Microsoft’s Teams platform offering very similar features to that of Zoom. For most meeting requirements, both will probably do the job, and as a result, Zoom has seen its moat disappear rapidly over recent years.
- We discount the terminal cash flows to today’s value at a cost of equity of 8.0%.
- Furthermore, 98% of workers want to work remotely at least some of the time.
- The Nasdaq composite shot up 43% amid buzz over generative artificial intelligence technology.
The Zoom IPO in April 2019 raised $752 million, with shares priced at 36. Zoom Video aims to be a player in the contact center market with its own products and services. As the coronavirus crisis eases, retaining small businesses as well as corporate accounts will be one key to Zoom’s success. For customers with one to 10 employees, renewals are expected to slow as the economy reopens and shelter-in-place orders lift.
Shares are trading at a forward price-to-earnings (P/E) ratio of just under 14, a huge discount to the broader market. And even with sluggish revenue growth, the business is poised to grow earnings faster than most. Clearly, the company is operating in a challenging environment and struggling to grow revenue and earnings. Whereas we have seen many technology stock prices skyrocket so far in 2023, Zoom stock is up just 7% YTD. Furthermore, shares are up just 2.5% since I last covered these in April, underperforming the SP500 index significantly as this one is up 14.5% over the same period.
Zoom published its fourth-quarter earnings results after the market closed yesterday and delivered a profit that came in far better than Wall Street had anticipated. The company also managed to beat sales expectations for the period. 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.
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In addition, management is able to improve margins and cash flows even as revenue growth keeps slowing down, which is remarkable. Zoom Video Communications, Inc. provides unified communications platform in the Americas, the Asia Pacific, Europe, the Middle East, and Africa. It serves individuals; and education, entertainment/media, enterprise infrastructure, finance, government, healthcare, manufacturing, non-profit/not for profit and social impact, retail/consumer products, and software/Internet industries. The company was formerly known as Zoom Communications, Inc. and changed its name to Zoom Video Communications, Inc. in May 2012. The company was incorporated in 2011 and is headquartered in San Jose, California. Furthermore, whereas Zoom operated the best platform during the pandemic, focusing on simplicity and meeting features, competition has caught up, resulting in a weakening moat for Zoom.
That was not enough to persuade investors to buy Zoom stock, as it is up just 1% from year-ago levels. During that period, its net income of $339 million surged 63% higher. Still, operating income fell during that period, and much of the gain came from $114 million in “other income,” which consists of income from interest, foreign currency, and marketable securities. Unfortunately for Zoom bulls, that “increase” is likely a one-time event.
The company is leveraging Anthropic’s large language model, known as Claude, across its platform, including its call center and the company’s AI companion. I must admit that Zoom’s fast roll-out of AI functionalities has impressed me as the company, in several areas, seems to outpace the competition with these innovations, adding to the attractiveness of the Zoom platform. As Wood and others have stated, Zoom is much more than an online meeting platform. It is a comprehensive communications ecosystem that includes team chat platforms, online whiteboards, VoIP phone service, workspaces, email, and other services. You still want to see better growth, which could ultimately depend on Zoom’s ability to increase spending by existing clients, since the company has more than 220,000 enterprise customers today.
How many shares of Zoom (ZM) stock are there?
Management has already indicated that it is not planning to leverage its significant cash position to buy back shares. Management is entirely focused on investing in the business and is likely to look at smaller tuck-in acquisitions and larger ones. This has been one of the key reasons why Microsoft has reported faster user growth in recent quarters and years. At the end of 2021, Microsoft reported 270 million users of its Teams platform, growing to 300 million by the end of 2022 and 320 million as of the most recent financial report. This includes over 1 million organizations and 91% of the Fortune 100.
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Zoom’s cloud-based software sets up video calls, with chat tools available. Zoom Video is racing to build more artificial intelligence tools into its business communications platform. Zoom Video recently backed off from a change in its terms of service for platform users that would have enabled https://www.topforexnews.org/investing/how-to-invest-money-in-5-simple-steps-2/ it to gather data to train AI models. Moving to the bottom line, the company has also performed much better than anticipated, driven by the resilient top-line performance and the optimization of usage across the public cloud, partially offset by investments in new AI technologies.
The company announced a new $1.5 billion share repurchase program, enough to retire 7.5% of outstanding shares at Zoom’s current price. Zoom now has $7 billion in cash and short-term investments against zero long-term debt. Fourth-quarter revenue was flat in Europe and the Middle East, and sales declined 3% in the Asia-Pacific region. Sales growth slowed for the ninth-straight https://www.forex-world.net/brokers/how-a-french-solo-trader-made-a-6-6-billion/ quarter as the company adjusts to slower product demand in the post-coronavirus emergency era. Analysts have debated when decelerating sales will hit a bottom. Prior to founding Zoom, Yuan was corporate vice president of engineering at Cisco, and was a founding engineer and vice president of engineering for web and videoconferencing platform Webex.
These innovations, coupled with the positive adoption rates, enhance Zoom’s value proposition and potentially mitigate some of the challenges it faces. And yet the business performed solidly throughout the past few years even as the stock fell. Zoom could fall on its face and grow its earnings at half the pace analysts expect, and the stock’s PEG ratio would still be under 1.
This increase was driven by stronger collections, targeted expense management, and higher interest income. This allowed Zoom to further strengthen the balance sheet as it ended Q3 with a total cash position of $6.5 billion, up a little over a billion from the start of the year. Meanwhile, the company has no debt on the balance sheet, leaving it in excellent financial health with plenty of cash to invest or use for acquisitions. As a result of these dynamics, the global videoconferencing market, from a stable level in 2023, is expected to grow at a CAGR of low-double digits.