ZM - Zoom Video: Inflection Point (Rating Upgrade)
2024-07-01 04:39:29 ET
Summary
- Zoom Video Communications has experienced slowing revenue growth post-pandemic, with only 3% growth in Q1'25.
- The company has improved its operating income profile through cost reductions, and the launch of new products like Zoom AI Companion makes the platform more attractive for enterprise customers.
- Despite challenges with retention and specifically, the net dollar expansion rate, Zoom Video's profitability and valuation have improved, leading to a stock rating upgrade.
Zoom Video Communications ( ZM ) has suffered slowing growth in its revenues ever since the end of the pandemic in 2021. In the most recent quarter, Q1’25, the video-conferencing platform generated only 3% top-line growth rate, a rate so small that some investors hardly associate with a software company. However, Zoom Video is rolling out new products, such as Zoom AI Companion which works as a productivity tool and the company has made significant progress in terms of operating income profitability. Aggressive cost cuts have had a positive effect on Zoom Video’s operating income profile and mark an inflection point for the company, which is leading me to a rating upgrade!...
Zoom Video: Inflection Point (Rating Upgrade)