Should you buy Zoom stock? (May 2024)

Published first at https://www.3minutebreakdowns.com Zoom Video Communications stock analysis. Ticker: $ZM Zoom reported earnings on Monday but the stock barely moved and is down 2% on the week. At the latest price the company has a market cap of 19.6 billion dollars. But Zoom also has nearly 8 billion of cash on its balance sheet and no debt which means the enterprise value is less than 12 billion. Revenue over the last 12 months comes to 4.6 billion, with 838 million of net income and 1.6 billion of free cash flow. So with a healthy cash balance and decent gross margins, Zoom looks cheap at only 6 times ebitda and 7 times free cash flow. That valuation is a far cry from the days of the pandemic when Zoom soared to over 100 times sales! What’s interesting is that Zoom now trades below where it was before the pandemic started, despite the company seeing a huge boom in users over that time. And that underperformance is clearly rooted in the fundamentals. Zoom revenues grew 88% in 2020, and over 300% in 2021. But growth in 2023 was only 7% and last year was even slower. Forward guidance is also a concern with Zoom guiding for 2% growth this year. That kind of growth isn’t enough, especially when you consider stock based compensation. Add that figure back to free cash flow and the enterprise value to free cash flow multiple increases to 18. Based on a discounted cash flow valuation, Zoom really needs to get growth up to around 10% a year for the stock to produce an adequate return. #investing #stocks #zoomstock #3mb