Zoom Video Communications (NASDAQ: ZM) is a relative newcomer to the public company sphere. The company's initial public offering (IPO) occurred in April 2019, and within two months, the stock increased by about 185% — it zipped up from $36 per share to $102.77 per share. It's a profitable communications platform company in an emerging industry, and its leadership team focuses on differentiating the organization from the other major players in the sector.
Eric S. Yuan, Zoom's president and CEO, acknowledges some challenges that await his company both in the immediate and distant future. But don't allow that analysis to spook you into avoiding the stock altogether. Instead, view it as an opportunity to examine the company and its stock performance to see if it's right for you.
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| Open61.440 | Close62.000 |
| Vol / Avg.2.801M / 3.518M | Mkt Cap19.066B |
| Day Range61.260 - 62.060 | 52 Wk Range58.870 - 75.905 |
Overview: Company and Stock History
Yuan founded Zoom (ZM) in 2011 after a 14-year career at Cisco Systems, Inc. as corporate vice president of engineering. He arrived at Cisco as part of the company's WebEx acquisition in 2007.
Yuan vowed to improve the customer experience by developing better, more reliable and easy-to-use video conferencing software and launched Zoom in 2011. The Zoom platform is compatible with mobile devices, desktops, telephones and conference room systems.
Zoom is an emerging company in a growing industry that understands the connectivity of the global workforce and the trend of individuals who work remotely. Companies must focus on innovation and convenience — a formula Yuan and his executive team embrace.
The company uses the terms "frictionless" and "happiness" throughout its marketing collateral and aspires to deliver a user-friendly connectivity tool: a video communications product that helps companies control spending by limiting travel expenses and expediting the decision-making process. Yuan believes the "happiness" component starts with internal employees: Happy employees create happy customers.
Zoom filed its IPO documentation in March 2019. Unlike most tech companies that file their IPOs, Zoom was profitable at this stage and remains profitable to this day. The collaboration platform company went public the following month on the Nasdaq Composite with a per-share price of $36. By any measure, Zoom had an impressive trading debut and stands as one of the best IPOs of 2019. The stock price escalated 81% on that first day and closed at $62 — a 72% surge.
Zoom stock soared during the pandemic and exceeded $550/share at its zenith. Shares proceeded to crash from those all-time highs as many of the growth stocks that outperformed in the pandemic gave up their gains. Zoom has been flat for most of 2023 which is quite the change from the company's volatile price movements from 2020-2022. Shares trade at roughly $66/share which represents a gain for investors who bought shares during the IPO.
The Future Outlook For Zoom
According to DataHorizzon Research, the video conferencing industry is expected to reach $27.6 billion by 2023, generating a 12.9% compounded annual growth rate (CAGR) in the process. Yuan thinks his firm is uniquely positioned to help spearhead that growth despite formidable competition from others in the industry. Zoom gives its customers the alternative to move beyond the antiquated, costly and often unreliable nature of legacy communication tools.
Zoom understands the changing nature of the global workforce and believes that communication tools must keep pace. The company's video-first communication platform operates under a simple 6-step process:
- Keep existing customers happy.
- Drive new customer acquisition.
- Expand within existing customers.
- Continuously innovate Zoom's video platform.
- Accelerate international expansion.
- Grow its partnership ecosystem and expand the platform.
The Benefits of Buying Zoom Stock
You don't have to spend much time experiencing Zoom's corporate culture to conclude that its whimsical approach to messaging is in stark contrast to the buttoned-up messaging of other organizations.
The company's values and forward-thinking posture hint at an innovative company comfortable in its own skin. That alone doesn't make its stock worth buying but it does provide insight into the company's mentality and how that might play into the viability of investing in it.
Here are some tangible reasons why you might want to look into buying Zoom stock.
Industry Leader
Zoom has quickly carved out a unique niche in the marketplace. Zoom built its video-first platform from the ground up and stayed away from aging technological infrastructure. The approach has made Zoom Rooms the top choice for many businesses. Zoom touts its team of extraordinary engineers who developed the platform and technology that exceeds industry standards.
Growth Opportunity
The evolving global workforce mandates that organizations have the capacity to connect people in a way that's as practical as face-to-face encounters. Zoom has demonstrated its ability to provide technology and products that are easy to use.
Profitability
Zoom is more than a high-flying growth stock that relies on debt to reward shareholders. Many technology companies do not become profitable or take several years after their IPOs to reach that point. The compelling nature of this investment opportunity is that the company is profitable. Zoom generates enough free cash flow to keep operations going.
Business Infrastructure
Zoom demonstrates a stark difference from its competitors. It offers a proprietary multimedia router that optimizes for the cloud and separates content processing from transporting and mixing streams. In other words, it's a reliable and high-quality product that works.
What to Consider Before Buying Zoom Stock
Zoom stock has several advantages and has become a household name. However, not every well-known corporation is a good investment. Investors should consider these risks before investing in the videoconferencing company.
Volatile Consumer Base
Zoom is a subscription-based business. The company relies on fees from those subscriptions and is susceptible to declines in consumer interest, either in its product or the video conferencing sector in general. However, if customers stay with the platform, it can generate predictable annual recurring revenue.
Delayed Response to Change
Alterations occur all the time in technology, and it's often time-consuming to integrate those changes into existing infrastructure. Zoom acknowledged in its S-1 filing that it may not be able to respond to rapid technological changes, extend its platform or develop new features. Zoom meetings became a go-to resource during lockdowns, but the company does not have a large moat.
Overvalued Stock
Zoom stock had an impressive trading debut and maintained that momentum during the pandemic. However, the growth stock crashed in 2022 which makes the valuation more reasonable. However, not all analysts are convinced that Zoom is trading at fair value.
How to Buy Zoom Stock
You've heard the buzz and think you might want to buy Zoom. What's next? You can participate in the stock market as long as you're armed with the necessary information. Here are a few steps to help you invest in Zoom.
Conduct Your Research
You might have read press clips or seen brief news stories about Zoom. But aim to dig deeper than just the superficial components. Find out who its competitors are and the future prospects of the industry. This knowledge base shows you what makes the company tick.
Choose a Broker
Part of your research should involve selecting a broker. There are online brokers you can use, or you can establish a more personal relationship with one of your local brokers at a brick-and-mortar facility. Price varies with either choice, but it's crucial that you're comfortable with the broker you select.
Fund an Account
Create an account and link your banking information to transfer funds or wire money into the account. Either way, once the funds are deposited, you're ready to start trading.
Finalize Your Zoom Stock Purchase
Zoom is traded as ZM on the Nasdaq. You're now ready to purchase Zoom stock at the current per-share price, less any fees or related costs using either your online or your neighborhood broker.
Best Brokers for Zoom Stock
Are You Ready to Buy Zoom Stock?
Eric Yuan has infused his persistent, can-do attitude into his company. It's paid off — not just with a stellar product, but with its incredibly successful IPO. That performance solidified the company's position as a major player in the industry and made investors of all levels take notice.
Frequently Asked Questions
Should I buy Zoom stock?
Zoom is a profitable growth company. Some investors are concerned about the valuation, but the company’s dominance in videoconferencing is a common point among bullish investors. It’s important to assess your risk tolerance and financial goals before investing in Zoom stock.
Will Zoom ever recover?
While it’s possible for Zoom to reach its 2021 highs in the future, investors shouldn’t expect it to happen for several years. Zoom’s ability to regain all-time highs depends on the company’s ability to achieve and maintain higher revenue and earnings growth rates.
Who owns the most Zoom stock?
Zoom’s three largest shareholders are Vanguard, ARK Invest, and BlackRock.