Zoom mounts a post-COVID comeback. What investors should know.
The company’s name became a verb during the pandemic as the majority of work, school, and social activity became remote. At its peak, some analysts projected Zoom would reach sky-high valuations and its telework platform would become the new normal for our economy.
But as the world reopened, expectations soon deflated along with ZM share prices. Now, Wall Street is speculating that AI could give Zoom a second chance to soar.
Shifting market winds take their toll
The tech market narrative has changed significantly over the past six years, from COVID-specific demands to AI-driven pivots. Meanwhile, several more industry- and company-specific factors are weighing on Zoom:
- Recent earnings guidance disappointed analysts
- Investors worry agentic AI tools could disrupt traditional software business
- Europe’s “tech sovereignty” push could limit the reach of US platforms
Nevertheless, institutional data points to signs of a potential rebound. Analysts estimate Zoom’s early stake in Anthropic ($51 million) could now be worth as much as $4 billion. New tools like AI Companion and workflow automation are expected to build brand loyalty. And with more cash than debt on its balance sheet, Zoom has some flexibility to adapt to shifting conditions.
Looking at the big picture
Analysts are now taking a much more nuanced look at a company once believed to be destined for explosive growth. But that doesn’t mean Wall Street thinks Zoom is a dead-end investment.
In fact, with a P/E ratio of 11-12x, the company is well below the average of its software peers. And discounted cash flow modeling implies ZM shares may be around 28% undervalued.
Roughly two-thirds of the stock is held by institutions and, aside from some trimming like an 11% cut by Korea Investment Corp, there hasn’t been a broad exit among big-money investors.
As for Zoom’s core business, management is highlighting product evolution, including expansion into AI-powered office tools, customer experience platforms, and secure payment services.
It all adds up to a mixed bag from Wall Street shops. Consensus is hovering around a “hold” rating, but firms like Needham still see upside toward $100 a share. That’s about $24 higher than Tuesday’s close.
Zoom’s COVID heyday is history, but the company might now be in the process of evolving into something that doesn’t depend on a global pandemic. If its AI-powered pivot pans out, the narrative could shift from headline-driven hypergrowth to slow-but-steady, long-term growth.