Zoom’s shares trade on the NASDAQ exchange under the ticker symbol ZM. If you would like to buy Zoom stock, you need to go through a broker. If you do not have a brokerage account, you need to open one to buy Zoom stock. Inexperienced investors can choose between two types of brokers: full-service or online/discount brokers.
Zoom Stock Fundamental Analysis
Zoom was growing in earnings and sales well before the Covid-19 hit. Its Video Communications segment EPS has grown from 275% to 800%, despite low single-digit EPS, over the past three quarters. Quarterly revenue growth across the last eight reports has stood between 78% and 182%. Last quarter ZM Stock reported EPS that beat analysts’ estimates by 114%.
The 2021 EPS estimate is up 29% from 2020, and the 2022 EPS estimate is up another 29%.
The earnings estimate is expected to far exceed expectations due to Covid-19, and estimates are being revised upward. ZM’s return on equity is 21%, meaning that the company is managed well. ZM Stock has also seen its after-tax margins improve over the past two quarters: 15.1% reported in December and 23% reported in March.
Institutional investors are taking a more significant stake in the company. The number of fund holdings of the company has increased by 5%. Because it is a recent IPO and extensive, there are many outstanding shares for institutions to buy.
What to Know Before Buying Zoom
Zoom has been around since 2011. Eric S. Yuan founded the company in his home country of China. Zoom was his idea of how to communicate between companies. He developed the concept while serving as Cisco’s corporate vice-president of engineering when he immigrated to the United States.
In an interview in 2017, Yuan predicted that Zoom would be beneficial to workers to telecommute, and he wasn’t wrong. The company’s growth occurred against a sea of video conferencing apps, like Skype or GoToMeeting. Zoom flourished because Yuan spoke personally with dissatisfied customers.
Zoom’s popularity stems from its reliability. Zoom is less prone to outages than other video conferencing apps that seem to have many glitches and buffering issues. Despite the interruptions of kids, the Livestream is always evident.
Apple offers FaceTime exclusively through iOS and iOS devices. On the other hand, Zoom is widely accessible on Android, iOS, and all P.C.s and Macs. Zoom helps workers and is also being used by schools to serve as a tool for digital learning. Free calls are no longer limited to 40 minutes so teachers and students can keep in touch. According to the company’s Chief Financial Officer, Kelly Steckelberg, Zoom is an attractive option for customers because it offers reliable and easy access.
ZM Stock Historical Performance
In April 2019, Zoom raised $752 million in its initial public offering at an IPO price of 36. On day one of trading, ZM stock soared 72%. Zoom stock rose further on June 6, 2019, after its earnings and outlook exceeded expectations. It reached an intraday high of 107.32 on June 20, a growth of about 200% from its IPO price.
However, at the end of June, ZM stock began to decline as some analysts questioned Zoom’s lofty valuation. Zoom stock formed a cup chart pattern over eight months, dropping by 43 percent from its high on October 23, 2019.
In January, before the coronavirus outbreak, the relative strength line of ZM stock had begun to improve. Zoom stock started to climb on February 18 after the coronavirus outbreak began spreading globally. The supply of ZM soared in March as corporate workers shifted to working remotely, which boosted demand for the company’s video-calling app. In early April, Zoom shares declined amid reports hackers were breaking into meetings. To block these cyberattacks, Zoom added a new security feature.
In late April, the stock went up after it reported that the daily active participant count had reached 300 million, with some participants being counted multiple times per day.
By May, Zoom Video had gained a considerable cultural following.
ZOOM Stock Technical Analysis
Zoom’s ten-week M.A. was broken in early August on a weekly chart. After a big run-up In October, Zoomtopia held its user conference and received positive reviews from analysts. Shares marked a record high of 588.84 on October 19.
However, ZM stock sent sell signals towards the end of October. The first is that it retreated more than 8% from its high-tight-flag buy point of 529.84. Zoom stock completed 2020 with a gain of over 400%. On January 12, shares reached 311, down 43% compared to the high of 588.84 scored on October 19. Deep corrections are rare in stocks.
What is an acceptable value for an exciting tech company whose revenues increase by 5%- 10%/year? We will certainly not accept a forward P/E ratio of over 150. These valuations are crazy and euphoric and make no sense. We saw these kinds of highly high valuations a decade ago when the dot com bubble appeared. Therefore, those stocks with such high valuations saw their stock prices crash by 70-80%, if not more.
Under these valuations and a poor growth outlook, ZM Stock is not a buy at these levels. ZM Stock makes a great short candidate for those who like to trade.
how much to invest in Zoom stock
Research and an idea of your overall portfolio will help you decide if Zoom is a good investment for you. Say, what do you think about the future of working and dialing in from home? But there are other factors to consider.
You should examine your financial situation and ask:
Will purchasing Zoom stock unbalance my portfolio? Investors tend to keep their investment portfolios balanced by avoiding too much investment in one company or asset. To support a diverse range of investments, most financial advisors recommend not having more than 10% of your portfolio in one stock.
What is on my radar for the short term? The stock market is an excellent way to build wealth over time. But it would help if you didn’t put all your short-term savings into it.
Before investing, be sure to keep some cash on hand for an emergency. Financial experts say that you should have three to six months of living expenses saved.
What are my investment plans for the future? Dollar-cost averaging, where you regularly invest over time, prevent you from buying into the market at times of high prices. Don’t forget that you can always buy more shares later.
How to buy shares in Zoom Video Communications
You can buy shares of ZM. from any online brokerage account. Among the well-known online brokerages with access to the U.S. stock market are WeBull, Vanguard Brokerage Services, T.D. Ameritrade, E*TRADE, Robinhood, Fidelity, and Charles Schwab.
Is Zoom Video Communications under- or over-valued?
For a meaningful valuation of zoom stock, all metrics must be considered a broader picture of its overall performance. However, analysts often use specific key metrics to gauge value.
Zoom Stock P/E ratio
Zoom Video Communications is valued at 93.37 times its trailing twelve-month P/E versus the Internet & Software industry’s P/E of 67.08 times. In other words, Zoom shares trade at around 93.37x recent earnings. That’s relatively high compared to, for instance, the trailing 12-month P/E ratio for the NASDAQ 100 in 2019 (27.29). The high P/E rate can indicate either investors are overconfident in the prospects of the company’s shares or overvalued.
Zoom Stock PEG ratio
Another thing to note is ZM.’s current PEG ratio is 5.67. PEG ratio is similar to the P/E ratio and considers the company’s anticipated earnings growth rate. The Internet & Software Industry averaged a PEG ratio of 4.67 at its closing price yesterday.
Is zoom better than Skype?
Many of you may be comparing Zoom vs. Skype since these are the two most popular video calling apps for professionals. Both options are good, but Zoom is the complete solution for business users and productivity.
If the small number of added features Zoom has over Skype does not matter to you, then the real difference is the price, explaining why Zoom is better than Skype.
Zoom’s regular subscription is $14.99 per year, but the free version is easy to use and includes many. Video calls can be more advantageous to those who need to communicate with over 100 participants or feel that they cannot deal with the 40-minute window.
If Microsoft Teams’ added capabilities, Office apps, and partnership tools benefit your team, you might as well bundle Skype components into it. However, this will cost you more since each Office 365 account costs at least $5. But, Microsoft Office is a very famous suite, and more businesses are paying for it.
If so, you’d better take advantage.
That is unless you genuinely wish to be all out with Zoom for a huge company and you wish to put 1,000 attendees in, defying Skype’s 300-person limit.
While choosing between Zoom and Skype, both offer simplified remote communication, but several factors buy zoom stock should consider before selecting a method over the other. Skype is the more user-friendly of the two apps, mainly because Skype has been around for a long time.
One of the reasons is that more people are already familiar with it. The 50-member maximum makes it desirable for small businesses and squads. Zoom can be a sensible choice for enterprise-size companies because of its wide-spread customer support network and intensive business features.
Frequently ask questions
Below are some frequently asked questions related to buying zoom stock.
Can you buy zoom stock?
Yes, you can buy zoom stock. Everyone can purchase zoom stock after its IPO in April 2019. Zoom stock is now traded on NASDAQ with the ticker symbol ZM.
Is Zoom a publicly-traded company?
Yes, zoom is a publicly-traded company. It went public on April 18, 2019, with a starting share price of US$36 per share; the share price increased over 72.1% on the very first day of its trading. In 2019 its revenue was 622 million USD.
Is Zoom stock overvalued?
Some of the Wall Street analysts raised the concerns that zoom shares are overvalued after a 601% surge in 2020 to date as schools, corporations, and government offices flock to the Zoom meetings.
To this date, March 2021 zoom is trading on 350 dollars per share which is 150 dollars less than early 2020 prices.
Zoom stock holds the Accumulation/Distribution Rating of D. This rating system analyzes the price and volume changes in store over the past 13 weeks of buying and selling (trading). So, the current rating of D indicates that more funds are buying zoom stocks than selling. This Accumulation/Distribution Rating, A+ being a higher-end to E being the lower end of the scale, measures institutional buying and selling a given stock.
As new and more video conferencing softwares are coming to the market and the world is opening up, zoom stocks are relatively going down since last year. If you buy zoom stock in 2021, it must be clear that its growth might be slow compared to other new technologies in various sectors of the world.