"Although the company is competing against some large industry incumbents, it may have just the right mix of innovative technology and strong customer service to take share from these larger competitors," Bonner adds. Additionally, it aims to become a more broad-based communications platform by enabling third-party developers to create a new applications ecosystem. To that end, it's rolling out product extensions, such as Zoom Phone Appliance. True, ZM can't influence secular demand for its communication services, but it can tilt things in its favor, Bonner notes.
For investors who believe Zoom's strong results can continue for years to come, now might be the time to pick up some shares at a discount.The central question for Zoom is whether the pandemic created a secular change in which employees continue to work from home at least part-time - or whether they are forced to return to their offices en masse, the analyst says. While that wouldn't be considered cheap, it is the lowest price-to-earnings multiple that Zoom has had since its IPO. On the flip side, the stock is now priced more reasonably, if not undervalued, for what's likely to be Zoom's business performance going forward.Īs of this writing, Zoom trades for 27 times earnings, only slightly above the S&P 500's multiple of 24. While that was exciting if you were a shareholder, it made buying shares at that time a dicey proposition. When Zoom was growing revenue in the triple digits during 20, the market had the stock priced as if that growth would never slow. However, even if the results from this quarter continue to hold steady into the future, that level of business performance would still be impressive. It remains to be seen what growth looks like in the coming quarters and years as the business normalizes. Similarly, Zoom's enterprise customer growth of 24% was the lowest it's been in the past five quarters.Īs mentioned above, all of these metrics were bound to slow after Zoom pulled forward so much growth over the past few years.
For example, while Zoom's net dollar retention rate for enterprise customers is very strong at 123%, that metric was 130% as recently as two quarters ago. While Zoom's Q3 results are impressive, investors should be aware that some of these metrics are slowing from where they were over the past few quarters.
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