Zoom stock walks back initial surge following earnings beat, improved profit forecast – MarketWatch – Zoom’s path to these market-beating returns is easier than you might think.

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Zoom had its day during the pandemic as one of the breakout tech stocks of , reaching a high of about $ in Oct. After going public in April of , Zoom ended that year up only %, compared to the S&P ‘s % return over that same time frame.
 
 

 

Is zoom stock going to go back up –

 

Founded in by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources , and more. Learn More. Investors appear to believe the company was poised to profit only during the pandemic.

But those who continue to hold for the long term have a different perspective. And one of them believes the company has a path to five-bagger returns, which would most likely be a market-beating investment in the coming decade. And not this year’s high. This is the all-time high reached during the middle of That’s when the stock peaked.

This has been a longer, more painful journey for Zoom shareholders and I’m right there with you. Why is Zoom down so much? Quite frankly, why was it up so much in the first place?

I mean, this was a little bit of the stock getting ahead of the company and the business fundamentals. A lot of companies fit that profile. Zoom, no exception here. I think there was a little bit of a narrative that got ahead of the business fundamentals. I think that that narrative has now shifted away from Zoom. The narrative says that this company can’t succeed now that we have a vaccine, now that we’re getting control over this coronavirus.

As we move away from the pandemic, the demise of Zoom, it is inevitable. That’s kind of the narrative that is going on out there. I think that that is a lot bit of a mistake when you look at the business fundamentals as we’ll see here in a minute.

Another thing that really hurt Zoom was a failed acquisition. They were looking to acquire Five9 and get into just expand their total addressable market. They were going to do an all-stock deal. That didn’t really sit well with investors, the stock started tumbling and then the deal fell apart, [LAUGHTER] and then the stock tumbled even more from there.

That is one big thing that did happen that has had a negative effect on the stock. Now, a couple of growth drivers here that I think really buck the narrative that Zoom was a pandemic-only stock. This company is still growing. They have many products to build upon their existing products. So we’re using Zoom right now, but they offer other things for companies that are already subscribed to Zoom’s core product. Mainly, Zoom Phone to upgrade the internal infrastructure at a corporate office.

They have Zoom Rooms, which is basically a conference room, but a whole lot of tech-enabled, very much tech-optimized conference rooms. These are a couple of growth drivers that the company has in ways that they can upsell existing customers. This is actually playing out. As we see people go back to offices, it actually makes more sense for them to start thinking about these other services that Zoom offers.

Now that we are going back to the office, make sense to upgrade it. They are expanding their services with existing customers. This is stuff that they have under contract. It’s going to happen. Maybe not necessarily right now, but you definitely want to see that trending upward.

Like I said, growth drivers. And this stock has never been cheaper on all of these valuation metrics. Barely profitable before. How about this, very expensive on profitability metrics, on your price-to-earnings, your enterprise-value-to-EBITDA going into the pandemic has gotten a lot, lot cheaper on those, but also on the price to sales. If you look at it, I mean, trading at 17 times, trailing sales right now, used to be a lot higher when this thing first went public.

This is as cheap as it has ever been to buy Zoom stock. The question that you have to answer as an investor is, are they going to lose customers going forward? They haven’t shown signs of doing that yet. In fact, they’ve been adding customers.

Are the customers going to spend more or less overtime? Well, so far they’re proving that they’re spending more overtime. They have these additional services that they’re really going to start ramping up in the coming year or two. I really think that this company has better-than-average growth going forward at the cheapest valuation it’s ever been. Matt Frankel: One thing I would say is that, the market misses about Zoom in comparisons to a Peloton and this is why we ranked it higher than a Peloton.

It’s like feeling Zoom has more staying power after the pandemic, because remote work is going away. Hybrid work is not. Companies are giving people the option. By remote work I mean offices are reopening. A lot of people are going to choose to continue to work remotely. Fool HQ is still close, but a lot of people I talk to say they’re going to choose to continue to work remotely. A lot of people want to be in the office, but not every day. That’s what makes these tools continuously valuable after the pandemic.

I think a lot of their growth was pulled forward. I think you’re going to see growth fall off a bit over the next couple of years, it unpleasantly surprised the market in the past couple of quarters, with how much, I think it’s slowed down, I think it’s the reason I would point out as to the stock being so cheap right now. But I think this does have staying power, it makes something that was not fun, better.

Jason Hall: Zoom grew its business eight-fold in less than two years, guys. I think what its customers have realized and what [CEO] Eric Yuan has realized along with them is the opportunity is these companies want to simplify their communications. They don’t want 35 vendors. They want one throat to choke as the saying goes. One back to pat. And Zoom Phone I think is part of that unified platform. I think there are nailing it. I really think they are because it just works, it’s just simple and it’s just reliable.

They move quickly when things aren’t good. I think that’s really important. But I just did a quick and dirty valuation. This is a five-bagger still, and that’s if the valuation drops to like 15 times sales, which you think about its margin profile, and a company like Microsoft , one of these big software companies, there’s not unreasonable.

Let’s say that’s where it ends up. I mean that’s a five-bagger from here, so that’s why I ranked this as high as I did. Cost basis and return based on previous market day close. Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of Discounted offers are only available to new members.

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Is zoom stock going to go back up –

 
 
Zoom had its day during the pandemic as one of the breakout tech stocks of , reaching a high of about $ in Oct. After going public in April of , Zoom ended that year up only %, compared to the S&P ‘s % return over that same time frame.

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