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Zoom stock forecast: Analysts estimate a 35% upside for ZM despite a sharp decline

Zoom stock forecast: Analysts estimate a 35% upside for ZM despite a sharp decline
Jordan
Major
3 months ago
4 mins read

Zoom Video Communications, Inc. (NASDAQ: ZM) shares plummeted 16.69% to $289.5 on Tuesday, finishing the session with its worst percentage drop since March 9, when shares lost 17%.

The Coronavirus epidemic forced individuals to work from home, which helped Zoom’s stock do well over the past year. Due to the fact that companies and offices are again reopening, investors fear that despite positive earnings results released on August 30, the firm may encounter some hurdles.

ZM is now trading towards the bottom of its 52-week range, which is a negative sign—indeed, given that the S&P500 Index is now trading at new 52-week highs.

ZM 20-50-200 SMA lines chart. Source. Finbold.com data. See more stocks here.

Indeed, ZM has been trading in a very broad range of $288.30 – $404.35 during the last month, and It is now trading near the range’s lows. Since prices have lately been stretched to the downside, traders seeking a good entry should wait for a period of consolidation before taking new long positions. 

Different trend lines in multiple time frames combine to produce a support zone between $288.48 and $289.49. At the same time, the first level of resistance ranges from $334.79 to $337.32, made by a mix of numerous trend lines and significant moving averages in the daily time frames.

Generally, ZM trades an average of 3 million shares each day in terms of volume. Notably, the volume has been significantly higher recently; this is a negative indicator when combined with the strong downward trend. Most of the time, an active stock is a good thing. However, based on recent performance and the price below the 20-day simple moving average (SMA), short-term momentum looks to be bearish.

Wall Street analysts predict 

However, based on Zoom’s performance over the previous three months, 21 Wall Street trade experts offered 12-month price projections. The stock’s average price target is $391.44, with a high forecast of $460 and a low forecast of $315. The average price forecast reflects a 35.21% shift from the previous price of $289.50.

ZM analysts’ price target. Source: TipRanks.com

Eleven TipRanks experts have suggested that ZM be held, while ten analysts have renewed their “Buy” recommendations in the past three months. It’s worth noting that none of them recommend selling. Accordingly, most experts think Zoom to be a moderate buy, with an average price target rise of 35.21% from the current price of $289.50.

Q2 Financial results

Even slower revenue growth is expected for the three months through October, according to the California-based firm. Meanwhile, the overall revenue for the second quarter was $1.02 billion, a 54% increase year on year, whereas analysts had predicted $991 million in revenue.

Its profits per share above analysts’ expectations of $1.16, which were $1.36. On the other hand, Zoom’s growth has slowed in the previous quarter; the first quarter of the year saw Zoom record a 191% growth rate, but the company anticipates it to be 31% in the current quarter.

Zoom growth opportunities

The Zoom platform is beginning to take shape, and it is expanding to become an all-in-one communication platform. For instance, Zoom Phone has previously been added to the platform, while Zoom Webinars & Events have just been released. 

While delivering solutions to increase income per user, it has broadened its portfolio to satisfy the hybrid work need. A better picture emerges when you combine this with the announcement of Five9’s acquisition for $14.7 billion.

A more extensive range of tools for business, data, and IT is currently missing from Zoom’s current offering. Microsoft (NASDAQ: MFST) and Salesforce (NYSE: CRM), on the other hand, are going head-to-head to develop a comprehensive integration that focuses on Zoom’s strength: collaboration. 

Since, Zoom’s platform isn’t as extensive as Microsoft’s or Salesforce’s at this point, so as an investor, this is something worth keeping an eye on to watch Zoom’s ability to handle the competition down the road.

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Jordan Major
Author

Jordan is an investor and market analyst. He's passionate about stocks, ETFs, blockchain, and digital assets. At Finbold.com, he delves into the technicalities to obtain future trends for new market traders and gives insights into user-friendly platforms for beginners.

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