Will Zoom Stock Go Up Again?

Will Zoom Stock Go Up Again? Originally designed for business usage, Zoom (ZM) launched in 2013 and has since seen a dramatic surge in download rates.

While 700,000 businesses and nearly 7,000 educational institutions had used Zoom as of 2017, it wasn’t until 2020 that this video conferencing service entered the public consciousness. As more and more COVID-related lockdowns came into effect, Zoom allowed friends, family, and colleagues to stay connected.

These trends had a significant impact on the company’s valuation and share price. While many quickly invested in Zoom, others now wonder if Zoom stock will spike once again after it came crashing down to earth following its sugar highs.

Is now the time to buy stocks, or is Zoom stock overvalued?

When Did Zoom Become a “Unicorn”?

Although the public now knows of Zoom following the events of 2020, a million Zoom users were logged within the first few months of its launch.

By two years post-launch, that number had reached around 40 million and by January 2017, Zoom reached a valuation of $1 billion.

Once Zoom went public in April 2019, the company’s valuation was just shy of $16 billion.

The initial ZM share price that was once trading for $36 were trading for $65 on the first day of trading. Shares began to taper off. However, Zoom remained profitable until the end of 2019. Once the year 2020 hit, that’s when usage significantly increased.

As reported by founder, Eric Yuan, in March 2020, Zoom saw 200 million daily meeting participants — followed by 300 million in April. To put these numbers into perspective, in December 2019, the number of daily meeting participants was 10 million.

However, this rapid growth led to some serious issues — the type of issues that resulted in government bans for businesses, organizations, and school boards. Some of the greatest concerns were based on privacy concerns and the use of unauthorized data.

How Fast Did Zoom Grow? 

Here is a collection of Zoom stats:

Zoom Daily Downloads

• January 2020 — 56,000
• February 2020 — 1.7 million
• March 2020 — 2.13 million

Zoom Revenue

• Fiscal year 2018 — $121.5 million
• Fiscal year 2019 — $330.5 million
• Fiscal year 2020 — $622.7 million

Zoom Share Price

• April 17, 2019 — $36
• April 18, 2019 — $65
• July 1, 2019 — $86.86
• October 1, 2019 — $75.81
• January 3, 2020 — $68.72
• March 30, 2020 — $146.12

Note: While the bulk of the public opted for Zoom’s no-fee, limited features option to remain connected to loved ones, large organizations made up the difference in terms of growing revenue.

Is Zoom Stock A Buy Or Is Zoom Stock Overvalued?

If you’re interested in buying Zoom stock, you may be wondering if it is currently overvalued. In 2020, Zoom stock surged.

While Zoom stock saw a year-to-date gain of 817 percent in mid-October, by the end of December, this value leveled out at 425 percent. That pullback has investors wondering if Zoom stock will go up again?

As COVID vaccinations began to roll out and investors saw the potential for continued hyper-growth to settle and fade, share prices fell by 37 percent between mid-October and the end of December. However, Zoom’s stock continues to be pricey.

In December, Wall Street analysts raised concerns that Zoom shares were overvalued — even though remote work is likely here to stay.

As of mid-January 2021, the price of Zoom stock dipped by around 35 percent. This decline has led to other analysts stating that now is the time to buy.

As reported by Barron’s, when accounting for Zoom Phone, the core video service business is currently undervalued.

There is still sustained elevation in regards to monthly active users and Zoom downloads, and when combined with the growth of remote hiring, the recent price reversal is making Zoom stock more attainable and a price-point that’s ideal for more investors.

Will Zoom Stock Go Up Again?

On January 12, 2021, Zoom announced that it had sold one million Zoom Phone seats since the product’s initial launch two years ago. This shows investors that there’s immense potential and that Zoom is not a one-trick pony.

Throughout the course of Zoom’s existence, the company has intrigued growth investors. It had (and continues to have) strong revenue and earnings growth, has been profitable and offers a strong balance sheet.

Even though Zoom stock was showing an upward trajectory, COVID has complicated things. Due to the events that took place in 2020 surrounding the coronavirus, ZM share price blew up. It was as if someone came and threw gas on an already furious fire.

So yes, COVID did most definitely accelerate Zoom’s growth and overall value. Based on the circumstances surrounding the pandemic, COVID acted as a catalyst. It’s important to remain mindful that the coronavirus fueled existing growth — it was not necessarily because of the virus that Zoom sustained growth.

That trend was already in place. Unlike the spike in PPE products, which will not sustain high sales in a pandemic-free world, video conferencing, and now Zoom Phone, are here to stay.

That is because Zoom meetings are cheaper than in-person meetings, more productive (as they take no travel time), and are more convenient.

Those who had not adopted video and web conferencing pre-COVID are now likely new customers and will remain customers post-COVID due to the newly evolved stay-at-home economy.

Is Zoom Stock Overvalued? The Bottom Line

There are two sides to the coin here.

While some believe that investors are being short-sighted in terms of Zoom’s potential growth, the current valuation is a concern for many.

Zoom is sitting at a $110 billion market cap, yet the projected sales for 2021 is only $3.56 billion.

The bottom line is that Zoom is a platform that has shown significant staying power. Although the current cash flow forecast suggests that Zoom is overvalued, based on certain lifestyle and business adjustments, Zoom will most likely remain an essential tool for years to come.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.