ZM share price forecast: More than a Covid-19 stock?

• Updated

It was a star of the pandemic. What is the future for the Zoom share price forecast?

If you were to pick a stock that represented the coronavirus pandemic, you would probably pick Zoom

Before Covid-19 came knocking in early 2020, the company’s video-conferencing app was not particularly well known. But fast forward two years, and it has achieved a rare thing – like Google, the company’s name has now become a verb. Very few businesses manage to seep into public consciousness in the same way.

However, whereas Google has post-Covid-19 staying power, analysts are openly wondering whether Zoom’s success will be limited to the pandemic. Can the Nasdaq-listed company prove naysayers wrong and retain users when things get back to normal?

Our Zoom share price forecast below can offer precious clues on where Wall Street thinks the ZM stock is heading next.

ZM share news

When results were announced on 28 February for the fourth quarter, Zoom stock predictions proved to be far too conservative. In the three months to 31 January, it notched up revenue of $1.07bn, a 21% increase from the same period last year.

To put that into context, Zoom had a higher turnover in the quarter than it did in 2018 and 2019 combined.

Going forward, the Zoom stock forecast can be informed by the company’s own predictions for how the new fiscal year will pan out. Looking ahead to the first quarter – covering the period through the end of April – it believes revenues will be similar, between $1.07bn and $1.075bn. For the full fiscal year, Zoom is aiming for total revenue of between $4.53bn and $4.55bn. ZM reported $4.09bn total revenue for the year, up 55%, with $1.38bn net income, or $4.50 per share.

At year-end, ZM boasted 509,800 customers with more than 10 employees, up 9% year-on-year, and 2,725 customers contributing more than $100,000 in trailing 12 months revenue, a two-thirds improvement.

Said founder and CEO Eric Yuan:

“Looking forward, we are addressing a large opportunity as we expect customers will continue to transform how they work and engage with their customers. It is apparent that businesses want a full communications platform that is integrated, secure, and easy to use.”

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One crucial factor in the Zoom share forecast is that the demand for video-conferencing is expected to stay strong. According to a report by McKinsey for the World Travel & Tourism Council, business-travel spending is expected to reach two-thirds of pre-pandemic levels. While economies have reopened and mask mandates are disappearing, experts are not ruling out another wave in the US and Europe before the end of the year.

Offices are reopening and welcoming staff back, but some companies are opting for hybrid models or even giving workers the freedom to do the job from their own kitchen table. According to a recent survey from the UK’s Institute of Directors, 75% of executives believe that working from home will continue even after the pandemic is over.

Zoom Video Communications, Inc.
Daily change
109.22
Low: 107.3
High: 109.74

How is the Zoom share price forecast looking?

Away from the Zoom stock price news, let’s take a look at the overall sentiment towards ZM stock.

To be honest, it is a rather mixed picture, to say the least. At the time of writing, ZM was trading under $133. According to CNN Business, the high-end estimate for Zoom stock stood at $400. Such an increase may seem fanciful, but in this climate, it is fair to say that anything is possible.

The median forecast projects a modest rise to $222.50, while the low-end estimate is $130, just a little less than the end of February. These figures are much more sobering – but despite that, 16 analysts still rate ZM a buy, 15 recommend holding the stock, but none gives a sell rating. It seems that experts on Wall Street still see something in the company’s fundamentals that they like.

The next 12 months are going to be exceedingly instructive as we see which direction ZM stocks head. The company had some serious growing pains earlier in 2020 as it grappled with security concerns and it acted quickly to retain the confidence of its users. But deep-pocketed rivals such as Microsoft (which has a market cap over $2trn) are making a concerted effort to ensure their offerings are a cut above the rest.

It is fair to say that most executives – and workers themselves – have been pleasantly surprised at how successful working from home has been. This has been the biggest gamble taken in the economy for many decades, an experiment that would not have happened on such a large scale if the pandemic had not emerged.

Now that there is clear evidence that people do not need to be in an office to get the job done, companies will probably be much more receptive to people working remotely. The ramifications of this could be significant. Office space owners have seen more vacancies, and cities have lost to suburbs and rural areas.

In the same way Zoom has already become a verb, employees in the 2030s could end up calling their home offices their “Zoom room”.

Further reading

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