Down Nearly 40% in the Past 3 Months, is Now a Good Time to Scoop Up Shares of Zoom Video Communications?

Although Zoom Video Communications (ZM) prices have fallen nearly 40% over the past three months, the company is making consistent improvements to products and services. So, let’s evaluate whether it is wise to buy the dip in the stock now.

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San Diego, California Video communications platform operator Zoom Video Communications, Inc. (ZM) introduced several new products and services over the past few months. Its shares rose in December 2021 just like a CITIC Securities analyst Junyun Chen started covering With a buy rating and a price target of $260.

But the stock fell 39.1% in price over the past three months and 12.2% over the past month to close yesterday’s trading session at $162.10, after hitting a 52-week low of $162. Squeeze home stocks like ZM, as mandates for social distancing are removed.

The company faces stiff competition from Microsoft Corporation (MSFT(Teams and Cisco Systems, Inc.’s)CSCO) webex. And in December, be Eric S. Yuan CEO sold 96154 sharesand his CFO, Kelly Steckleberg, sold 6,700 shares. And recently too Hedge funds’ interest in stocks fell. So, ZM’s near-term prospects look uncertain.

Here are the factors that could shape ZM’s performance in the coming months:

positive developments

ZM announced on January 10 that Zoom Meeting Client version 5.6.6 has become the first video communications client to receive the Common Standards Assessment Assurance Level 2 certification, issued by the German Federal Office for Information Security (BSI). In December 2021, the company Obtained certain assets from Limal. Also, it introduced a bunch of updates to its lineup of products in November 2021, including Zoom meetings, phone, and events, and added a new feature to automatically download Zoom client updates.

solid financial

For the third fiscal quarter ending October 31, 2021, ZM’s revenue increased 35.2% year-over-year to $1.05 billion. The company’s non-GAAP income from operations was $411.28 million, an increase of 41.4% year over year. Its non-GAAP net income rose 13.9% year over year to $338.38 million, while non-GAAP earnings per share was $1.11, which was a 12.1% increase year over year.

Ongoing investigation

On December 21, 2021, the law firm Brundidge & Stanger PC announced that it had begun creating a file Patent infringement complaint against ZM on November 9, 2021, for alleged infringement of its client Cyph, Inc.’s patents and inventions. In July 2021, several law firms were launched Investigations against the proposed merger Between ZM and Five9, Inc. (FIVN). Thus, ZM and FIVN terminated the merger agreement on September 30, 2021, because FIVN did not receive the required shareholder support.

Extended evaluation

In terms of the non-GAAP forward P/E multiple, ZM’s 35.02x is 43.4% higher than the industry average by 24.42x. 3.37x per share vs non-GAAP redirectPEG is 101.9% is 1.67 times higher than the industry average. Also, 11.54x, 28.61x and 12.46x each for EV/S, EV/EBITDA, and P/Sare each above the 4.11x, 16.31x, and 3.99x industry averages.

POWR ratings reflect uncertain near-term prospects

ZM received an overall C rating, which is equivalent to a neutral rating in our region POWR . ratings the system. POWR ratings are calculated by taking into account 118 characteristic factors, with each factor weighted to the optimum score.

Our rating system also rates each stock based on eight distinct categories. ZM has a C value score, which matches the higher rating ratios from the industry.

The stock has a grade of C for growth, which is in line with analyst expectations that earnings per share will fall 13.9% for the quarter ended January 31, 2022, and 22% for the quarter ended April 30, 2022.

ZM has a C score for Momentum, which coincides with a 57.2% loss over the past six months and a 12.2% drop over the past month.

ZM is ranked #42 out of 78 stocks in the Technology – Services industry. In addition to the POWR rating scores I just mentioned, we also rated the stock for stability, feel, and quality. click here For all ZM reviews.

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ZM’s stock price has soared in its fiscal year 2020 amid the COVID-19 pandemic and peaked at $565.45. However, the stock is currently trading below its 50-day and 200-day moving averages at $211.13 and $296.68, respectively, which indicates a downtrend. Moreover, it could continue to decline in the near term, with stiff competition from other big players. Therefore, we think it may be wise to wait before collecting its shares.

How does Zoom Video Communications (ZM) stand up to its peers?

While ZM has an overall POWR rating of C, one might want to consider investing in technology-services stocks that have an A (strong buy) rating: NetScout Systems, Inc. (NTCT) and Celestica Inc. (CLS).


ZM shares were down $0.85 (-0.52%) in pre-market trading on Friday. Year-to-date, ZM is down -11.86%, versus a -2.20% rise in the benchmark S&P 500 over the same period.


About the author: Manisha Chatterjee

Since she was young, Manisha has had a keen interest in the stock market. She majored in economics in college and has a passion for writing, which led to her career as a research analyst.

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