While risks persist for Zoom (ZM), given the macro environment and potential weaker renewals, the company has displayed aptitude in navigating these issues. ZM's expanding offerings in the communication sector signal potential future growth. Currently, investors get a significantly undervalued stock rich in cash and generating significant free cash flow. The author rates the stock a "Buy" with a prospective upside to $100 based on FY25 figures, representing a valuation far beneath where most SaaS companies were trading this summer.
Key Points in the Investment Case
- Despite the recent decline in stock value, the company maintains a robust cash position.
- ZM has diversified its product offering beyond just video - communication to include solutions like Zoom Spaces, Zoom Events, and AI tools.
- The enterprise customer base has grown, with an increase in larger clients contributing significantly to revenue.
- ZM's recent fiscal results surpassed analyst expectations in both revenue and EPS.