Is Zoom (ZM) an Under-The-Radar AI Stock?

We recently published Top 10 Analyst Calls on Trending Stocks You Shouldn’t Miss. Zoom Communications Inc (NASDAQ:ZM) is one of the major analyst calls.

Zoom Communications Inc (NASDAQ:ZM) apparently lost its attraction after the pandemic days ended, since free video calling software became ubiquitous. However, OptionsPlay‬’s Tony Zhang believed the stock was a buy amid the company’s AI tool. Talking to Schwab Network in May this year, the analyst said:

“Recently they’ve really turned into an AI play, actually, from my perspective. We have the AI companion tool that they’ve launched recently—it’s their fastest growing product. Their enterprise model has been growing incredibly well, and from a valuation perspective, it’s one of the most compelling stories within the AI space. Trading at 14 times forward earnings, there’s really no other AI company trading at those types of valuations right now.”

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The analyst said the stock has “struggled” a lot over the past few years but believes it can trade above $100.

“I said the AI tool that they recently just launched is their fastest growing product, and I think investors are starting to pay attention right now. When I say it should be trading in the $100 range, it’s really more longer term. Short term, you’re absolutely right—you have that $90 resistance level, so very short term that’s my upside target. But if we can get back above 90, we’re looking at 125 and potentially even higher than that.”

At the time of Zhang’s comments, the stock was trading at around $81, while it stands at $85 as of September 8.

Guinness Global Innovators stated the following regarding Zoom Communications Inc. (NASDAQ:ZM) in its Q4 2024 investor letter:

“Zoom Communications Inc. (NASDAQ:ZM) has struggled since coming out of the pandemic with changing consumer trends and a tougher macroeconomic environment. At purchase, Zoom looked attractive from a valuation perspective, having derated from its 2021 highs to near pre-pandemic levels – despite being a fundamentally better business. The company had built a strong brand, with ‘Zoom’ becoming synonymous with online conferencing and video calling after the company’s success during the pandemic, and the resulting paradigm shift towards increased hybrid working. What was once a more ‘speculative’ growth stock at the start of the pandemic, was now a slightly more mature growth company with high market share (underpinned by a best-in-class product), stickier revenues, and a stronger balance sheet with $5bn in cash creating room for growth investment. With a superior product and strong brand presence, growth expectations for the company were around mid to high single digits. However, since purchase, Zoom has returned -34% versus the MSCI World Index, which was up 28%, with a growth profile that has disappointed. The company’s key Enterprise segment has seen decelerating growth, with both customer growth and the net dollar expansion rate (Zoom’s revenue per user metric slowing significantly). Customer growth has slowed from a rate of 25% YoY in the quarter prior to purchase to an estimated 3.6% by the first quarter of 2024. Net Dollar Expansion rate has slowed even further, currently at 101% (1Q24) vs c.123% at purchase…” (Click here to read the full text)

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Disclosure: None. This article is originally published at Insider Monkey.