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Down Massively, Zoom Stock Is Poised to Be a Long-Term Winner | The Motley Fool.
Zoom’s (ZM %) stock price and growth are down significantly from their pandemic highs over the past two years. Due to that sell-off, Zoom stock is cheaper than ever. Zoom is trading at price-to-free cash flow and price-to-earnings ratios of 22 and
ZM stock skyrocketed early in because of the pandemic. When we could not leave our homes, we had to use its services for everything. That was the thesis then and it remains so now, only better. In it ran on hopes of bigger results, and the company has since proved the concept. This is a stock worth owning for the long term. Naturally, user metrics for ZM stock exploded during lockdowns, and so did the stock.
That was a sure sign of bloat suggesting investors had unrealistic expectations. I was right, because the reality did not live up to that and investors are still punishing it. They are now making the opposite mistake they made in October of This is when it becomes interesting — while they are still panicking out of ZM, it is a bargain worth exploring. There are two problems to consider before going all in. First, it is still a falling knife and dangerous to catch.
The second problem is the overall correction of indices. The overshoot is creating opportunities, but I am concerned about the drag from the indices. Now, the bears are in control for the first time in a while.
The bulls have lost all tailwinds, including the Federal Reserve. Add to this current geopolitical tensions, and the concerns are valid. My thesis is that this too shall pass, but in the short term I realize the looming headline risks.
Therefore, I would not take positions without leaving room for error. I take my conviction level down a notch by design. Zoom stock does not trade in a vacuum, so it needs a solid market within which to rally. Last night, the indices broke through key support levels and are hanging on by a thread. Luckily, the fundamentals are impeccable, and they do support the bullish thesis.
The easiest mistakes to avoid are often from chasing runaway stocks. The current commodities rally is potentially a giant disappointment in the making. The current ZM stock situation is the opposite of that.
This makes the downside risk much smaller than the upside opportunity. Those who believe in charts also may see patterns suggesting a rebound rally is brewing. Starting a long position now gives investors ample opportunity to profit in the midterm.
The idea is to own it for the long term, but with a short-term scalping opportunity. The pandemic pretty much killed the old buy-and-hold methods. Luckily, I was online with my trading group and suggested they buy puts in it at the open. Those who did made a killing in mere hours, safely shorting the spike. Regardless, I still enjoy doing some good old-fashioned homework and trusting financial statements. Moreover, that comp came on top of an astonishing pandemic year scorecard. Management earned all the kudos it needs from me until they commit a mistake.
I had concerns about potential disappointments in versus when the pandemic began. But the company passed the test with flying colors. Current buyers of ZM stock have realistic expectations, paying only 9 times actual sales. On the date of publication, Nicolas Chahine did not have either directly or indirectly any positions in the securities mentioned in this article.
The opinions expressed in this article are those of the writer, subject to the InvestorPlace. Do this now. Stock splits typically have led to oversized returns, says Bank of America. Look beyond the popular growth stocks. A healthy stream of income awaits. It’s certainly understandable; getting more shares of your favorite company can bring a smile to the faces of even the most stoic among us.
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But bargain-hunter Buffett continues to bet on big oil. Stocks fell last week, but was it constructive? Tesla tumbled on Elon Musk’s “super bad” warning. Apple WWDC is due. Europe, where Tesla has just opened a production site, is an important market for the electric vehicle manufacturer and its CEO. Saving for a financially secure retirement is a long-term project with a sometimes indistinct final objective, especially when people are just starting in their careers.
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While we will not be weighing in with fundamental analysis, we hope this piece will give investors interested in stocks on the way down a good starting point to do further homework on the names.
Snap Inc. The metaverse offers added opportunities for a variety of tech stocks. Although big drops in the stock market can be unnerving and tug on investors’ emotions, they’re also, historically, an excellent time to put your money to work. Corrections and bear markets tend to run their course relatively quickly, and all notable declines throughout history have eventually been erased by a bull market rally.
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These two stocks will pay you in your sleep and alleviate your concerns about the ongoing tech sell-off. Markets closed. Dow 30 32, Nasdaq 12, Russell 1, Crude Oil Gold 1, Silver Vix CMC Crypto FTSE 7, Nikkei 27, Read full article.
More content below. Nicolas Chahine. In this article:. A woman sitting at a desk waves at a large number of people on the videoconferencing software Zoom ZM.
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It’s a bundled offer that includes all or part of the features we have seen above to serve clients’ needs better. The pandemic has offered Zoom free visibility, which would have otherwise required millions of dollars and a great marketing effort.
Marketing expenses are now more focused on specific services, products, and bundle offers to promote customers’ combined offers. Zoom has thus devoted its efforts to building a sales representative network with a special focus on big accounts.
These accounts are now followed by an account executive with the goal to set up and take care overtime of long-lasting relationships. Zoom has also set up a framework to train agents to sell Zoom Phone, mainly in the US for the time being. The scheme will be repeated to support international expansion. The Asia Pacific is expected to be a major growth driver in This margin results from low marketing costs for the reason explained above and the accelerated revenue growth due to the pandemic.
It might reach even higher margins depending on the ability to build up its own server capacity and data centers moving out of public clouds. Based on these assumptions, the stock looks almost fairly valued at the current share price. Zoom stock has been a great growth story in the past two years. Zoom can currently offer the best communication ecosystem, and clients recognize its superiority compared to other platforms thanks to the superiority of its technology which relies on native cloud architecture.
It is extremely flexible as it can leverage existing cloud services and eventually certifications achieved by cloud providers. Although switching costs are limited and competitive advantage is marginal in the conferencing sector, Zoom seems to have created a decent moat as it becomes more and more embedded in clients’ workflow.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it other than from Seeking Alpha. I have no business relationship with any company whose stock is mentioned in this article. Moat Investing 1. From killing application to killing global communication platform Zoom ecosystem currently relies on: 1.
Zoom Rooms Zoom rooms are suited for large corporates and organizations that constantly rely on Zoom video meetings. Zoom United It’s a bundled offer that includes all or part of the features we have seen above to serve clients’ needs better. Key valuation issues The pandemic has offered Zoom free visibility, which would have otherwise required millions of dollars and a great marketing effort. We assume a 3.
See table 4. This article was written by. Moat Investing. We are a group of experienced investors that like to dig deeper into stocks to find growth stories at a reasonable price with strong economic moats. The company is solidly profitable, cash flow is good. These are all good numbers and that’s not likely to dramatically change with next week’s earnings announcement. But adjusted earnings are going to drop. Earnings are going to look worse this year for sure.
That has Wall Street nervous, so I understand that. But the big concern is what’s going to change the story, I guess, for Zoom? But the long-term picture is pretty good, I would say, in terms of more people moving into this remote work, telework schedule. They’re a leader in that space and if they can hold onto that position, they should be great.
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All rights reserved. Charles St, Baltimore, MD Then Zoom became a verb when lockdowns prompted businesses, people, and schools to rely on video calls to interact with one another. As Covid put Zoom in the spotlight, many investors began regarding Zoom as a pandemic stock. Such a view might imply the company will be less relevant once the pandemic is completely over. However, remote work is not likely to disappear. Many businesses, especially large enterprises, plan on using video apps even as the pandemic fades out.
Investors noted that the growth is slowing, mainly due to a decline in the number of small business and individual subscribers. Over the course of the pandemic, Zoom has become one of the most popular video conferencing applications on the market. Despite the recent decline in price, Zoom still remains a growth story. Market research shows a significant change in the workplace, a trend that is likely to benefit Zoom further.
Meanwhile, Zoom keeps enhancing its platform. In July, the company announced two major app launches. Now users can embed third-party apps in meetings. Wall Street is noticing the potential of this unified communications platform as a service UCaaS offering. Understandably, such growth implies a massive market opportunity for Zoom.
However, Zoom is likely to take a significant share of this pie. Zoom stock has been a great growth story in the past two years. Individuals and small businesses may cut down their reliance on video conferencing software, but the corporate world will likely keep relying on the app. From a valuation perspective, ZM stock looks increasingly cheap as well.
Despite plunging share price, revenue and profit have continued to grow, pushing the price-earnings and price-sales ratios to all-time lows. As a result, the stock now trades around 52x forward earnings and 22x trailing sales. Interested buy-and-hold investors could consider buying the dip in ZM shares.
On the date of publication, Tezcan Gecgil did not have either directly or indirectly any positions in the securities mentioned in this article. Tezcan Gecgil, Ph. In addition to formal higher education in the field, she has also completed all three levels of the Chartered Market Technician CMT examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.
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