Potentially the most important of those new initiatives is Zoom's contact center offering, announced in February. But growth going forward is likely to be led by new initiatives. Zoom's growth to this point has been driven by the videoconferencing business. But at the very least, the repricing of the stock has created far more reasonable expectations for growth going forward. It bears repeating: Zoom stock is not a value play, and it's not close. The balance sheet looks rock-solid, with more than $5 billion in cash and marketable securities-a total nearing 20% of the company's market cap-and zero debt. That's in line with some of the better businesses in all of tech. Even on a GAAP (Generally Accepted Accounting Principles) basis, which includes the expense for stock issuance to employees, Zoom should post operating margins this year of over 20%. Meanwhile, the company is impressively profitable. Given how much demand was driven by the pandemic, the fact that Zoom expects revenue to increase at all this year seems like a win. The expected $4.53 billion-$4.55 billion in FY23 revenue, amazingly, is nearly 14 times what the company generated just four years earlier. Even with offices reopening this year, Zoom expects top-line growth of roughly 11% against FY22 levels. That said, this remains an awfully attractive business and one that should receive a high earnings multiple. Accounting for that stock-based comp, the forward price-to-earnings multiple here likely clears 35x. ![]() And Zoom's adjusted figures exclude share-based compensation, which is significant: Zoom booked $477 million of such expense, which means that even after tax that expense boosted adjusted EPS by more than $1. Relative to the midpoint of the company's guidance for fiscal 2023 (ending January), shares trade at more than 28x this year's expected adjusted earnings per share. To be sure, at $100 ZM stock isn't quite a value play. There is one big risk here, certainly, but investors comfortable with that risk should see ZM as a buying opportunity at current levels. And while the market clearly pushed ZM stock too high in late 2020, it's fair to wonder if investors have let the stock fall too far here in 2022.įundamentally, shares look rather attractive, particularly with the company's plans to expand beyond the core video conferencing service. To put that into context, the likes of AT&T (NYSE: T), Lowe's Companies (NYSE: LOW) and CVS Health (NYSE: CVS) each currently have total market caps that are less than the equity value Zoom added in just nine and a half months.Īlmost as incredibly, the stock has given back nearly all of the gains, with shares now trading modestly above $100. Incredibly, during that rally Zoom's market capitalization increased by nearly $150 billion.
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