This Pandemic-Era Stock is Finally Roaring Back

Zoom Video Communications ZM was a beloved stock in the pandemic era thanks to its explosive gains, with stay-at-home orders and other developments leading to huge growth for the company’s platform.

The stock plunged as a result of a big growth cooldown post-pandemic, leading many to forget about the stock entirely. But shares have been quietly strong off 2024 lows, gaining 45% and widely outperforming the S&P 500 since. Lows were made in mid-August of 2024.

Notably, the stock is now a Zacks Rank #1 (Strong Buy), indicating bullish EPS revisions among analysts.

Let’s take a closer look at how the company currently stacks up.

Zoom Lands Lucrative Customers

ZM’s sales grew by nearly 5% from the year-ago period in its latest release, with adjusted EPS of $1.53 climbing 10% year-over-year. Its cash-generating abilities did see a nice boost, with operating cash flow of $516 million growing from the $449.3 million mark in the same period last year. Free cash flow of $508 million was up nearly 40% year-over-year.

Notably, the number of customers contributing more than $100,000 in trailing 12-month revenue was up +8.7% from the year-ago period. This growing, lucrative customer base is undoubtedly a huge positive trend for ZM’s top-line performance moving forward.

Below is a chart illustrating the number of ZM customers contributing more than $100k in TTM revenue.

The 5% quarterly sales growth rate in the above-mentioned period reflected the highest in eleven periods, further reinforcing the positive turnaround the company is currently experiencing.

Below is a chart illustrating the company’s year-over-year sales growth rates.

Zoom upped its current year sales and free cash flow guidance following the above-mentioned period thanks to the recent momentum. Sales expectations for its current fiscal year have remained positive over the last year overall, with the $4.8 billion expected reflecting 3.8% year-over-year growth.

Bottom Line

Zoom Video Communications ZM has seen its shares bounce back in a big way off 2024 lows, with a more lucrative customer base providing elevated sales growth. While no longer experiencing the supercharged growth as it did in the pandemic era, a growing and lucrative customer base still paves a nice outlook.

Upgraded sales and free cash flow guidance help confirm the momentum, with the stock also sporting the highly coveted Zacks Rank #1 (Strong Buy).

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This article originally published on Zacks Investment Research (zacks.com).

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