ZM - Zoom Video: Premature To Pin Reacceleration Hopes On The Contact Center (Rating Downgrade)

2024-07-15 22:40:20 ET

Summary

• Zoom Video Communications has spent resources on developing a robust slate of new products, such as the Phone and Contact Center, to diversify its dependence away from Zoom Online.
• Despite efforts to drive monetization for Zoom's products, its Expansion Rate is contracting, especially among Enterprise customers, leading to slow sales growth and customer downgrades.
• The volatile Contact Center market, dominated by GenAI solutions, poses challenges for Zoom's transition and growth, leading to a premium-priced stock and a Sell rating.
• With earnings and revenue expected to grow in low-single digits, its forward PE of 11x is expensive.

Investment Thesis

Since the precipitous fall of Zoom Video Communications ( ZM ) stock post-pandemic boom, the San Jose, CA-headquartered company has been in a fight to arrest the decline in sales by working hard on diversifying its product slate away from its pandemic breadwinning products such as Zoom Online. In the last two years, the company has embarked on many product initiatives, including Zoom Phone, their Zoom Workspaces product line, and Zoom Contact Center....

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