Zoom stock crashed, but fundamentals are intact, analysts say

Zoom stock crashed, but fundamentals are intact, analysts say
Updated: 10 Jan, 2021
2 mins read

The pandemic darling Zoom (NASDAQ: ZM) stock price crashed as investors have started dumping internet stocks after Pfizer (NYSE: PFE) announced that its coronavirus vaccine has more than 90% effectiveness.

Shares of video communication company are now down almost 30% from the 52-weeks high of $588 that it had hit last month. Meanwhile, some value investors believe the massive share price drop is presenting a buying opportunity for long-term investors. Zoom stock price is currently trading at around $380.  

ZM Zoom Video Communications, Inc. daily Stock Chart
Zoom stock performance. Finviz chart

Zoom can prevail even after pandemic

Zoom is a video communication tool that has gained user’s confidence after the pandemic has forced people to work from home.

However, Mizuho Securities analyst Siti Panigrahi believes Zoom has the potential to sustain growth trends even if the pandemic ends. This is because it has now turned into a critical component for business communication.

The analyst has also highlighted the confidence in its licensed based business model (not usage-based) that offers downside protection. The firm has provided a price target of $550 for Zoom stock.

Financial Outlook is backing Zoom stock

Zoom has generated almost 355% revenue growth in the latest quarter while operating income jumped to $188 million from $2 million in the year-ago period.

The company expects December quarter revenue in the range of $685M-$690M. For the full year, the revenue guidance stands around $2.37B-$2.39B, representing 281%-284% growth from last year.

The market analysts are bullish over Zoom’s strategy of adding more products to the portfolio. Bernstein has provided a price target of $650 for Zoom stock, citing a huge runway to grow penetration and revenue.

Its analyst Chrane claims Zoom phone adoption has only hit 1% of the potential user base, with expectations that phone adoption would add billions of dollars to its revenue base in years ahead. The analyst expects $1.6 billion in recurring revenue next year.

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Justinas Baltrusaitis

Justin crafts insightful data-driven stories on finance, banking, and digital assets. His reports were cited by many influential outlets globally like Forbes, Financial Times, CNBC, Bloomberg, Business Insider, Nasdaq.com, Investing.com, Reuters, among others.