Zoom Video Communications (ZM) Stock

Reporting its Q3 results on Monday, Zoom Video (ZM) continued an impressive streak of surpassing earnings expectations and offered favorable revenue guidance.

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ZM's AI innovation, strong enterprise growth & robust financials signal upside potential. Record-low churn and expanding product portfolio make it a compelling tech buy.

Zoom is overvalued with a -50% negative margin of safety in my conservative model due to low revenue growth, warranting a Moderate Sell rating. Despite beating Q3 estimates and unveiling new AI initiatives like AI Companion 2.0, Zoom's expansion into AI and contact centers faces stiff competition, making execution challenging. Even in bullish scenarios, valuation models show Zoom's modest growth and competitive pressures make it unattractive at current valuations; future growth is insufficient to justify the stock price.

Zoom Video's stock is undervalued, trading at 15x forward free cash flow, with 30% of its market cap in cash and no debt. Despite modest revenue growth, Zoom's strong balance sheet and strategic investments in AI and contact centers support a bullish outlook. Recent earnings report showed slight free cash flow margin compression, yet the company remains financially stable with potential for improved cash flow in fiscal 2026.

Zoom Video Communications Inc. is dropping video from its name in an AI-first rebranding effort. The company, best known for its videoconferencing, will now be known as "Zoom Communications Inc." Zoom isn't the only company revisiting its trajectory in the AI boom.

Zoom Video Communications, Inc. (NASDAQ:ZM ) Q3 2025 Earnings Conference Call November 25, 2024 5:00 PM ET Company Participants Charles Eveslage - Head of Investor Relations Eric Yuan - Founder and Chief Executive Officer Michelle Chang - Chief Financial Officer Conference Call Participants Meta Marshall - Morgan Stanley Kash Rangan - Goldman Sachs Arjun Bhatia - William Blair Patrick Walravens - JMP Securities James Fish - Piper Sandler Alex Zukin - Wolfe Research Siti Panigrahi - Mizuho Allan Verkhovski - Scotiabank Michael Funk - Bank of America Samad Samana - Jefferies Tyler Radke - Citi Mark Murphy - JPMorgan Charles Eveslage Thank you, Kelcey. Hello everyone, and welcome to Zoom's earnings video webinar for the Third Quarter of Fiscal Year 2025.

The headline numbers for Zoom Video (ZM) give insight into how the company performed in the quarter ended October 2024, but it may be worthwhile to compare some of its key metrics to Wall Street estimates and the year-ago actuals.

Zoom Video Communications (ZM) came out with quarterly earnings of $1.38 per share, beating the Zacks Consensus Estimate of $1.31 per share. This compares to earnings of $1.29 per share a year ago.