Zoom (ZM) has lost over two-thirds of its stock value in the past year. Mr. Market paid $301.40 for Zoom Video Communications Inc. (NASDAQ: ZM) on 10 September 2021 and $84.08 for ZM on 12 September 2022.
Therefore, Zoom’s stock has collapsed. Consequently, some people will wonder if Zoom itself will soon collapse. One rationale for this view is COVID-19. The pandemic, which closed offices and promoted social distancing, drove Zoom’s popularity.
For example, the number of Zoom meeting participants grew by 2900% during the pandemic, Business of Apps claims. Similarly, Stockrow estimates Zoom’s revenues grew by 368.78% in the quarter ending on 31 January 2021, 191.39% in the quarter ending on 30 April 2021, and 53.88% in the quarter ending on 31 July 2021. Notably, the revenue growth fell to 7.64% in the quarter ending on 31 July 2022.
Thus, Zoom’s astronomical growth has ended. Yet the company still experiences some growth.
Is Zoom Usage collapsing?
More people were working at home and fewer people were travelling for business which drove demand for video meetings. Yet, interest in Zoom is falling.
Statista estimates visits to Zoom’s website (Zoom.us) fell from 1.8 billion in January 2021 to 1.3 billion in May 2022. Similarly, the number of Zoom business customers fell from 470,100 in 2020 to 191,000 in 2021, Business of Apps estimates.
Notably, Zoom reached 350 million daily meeting participants in December 2020, Business of Apps reports. That number grew from 10 million in March 2019. However, Zoom has not released the daily meeting participants’ numbers since December 2020. On the other hand, Tech Jury estimates Zoom had 12.92 million monthly active users in September 2022.
What Market Does Zoom Have?
Yet, Zoom’s customer base, people working from home and their employers is still enormous. McKinsey’s American Opportunity Survey estimates 36 million Americans or 23% of US employees work remotely. Around 58% of survey respondents or the equivalent of 92 million Americans claim they can work from.
Therefore, there are many people who need something like Zoom to talk to the office or coworkers. Video meetings have become part of the culture.
Even the Royal Family uses video conferences. News reports say Queen Elizabeth II had a videoconference with British government officials scheduled on the day of her death. Moreover, King Charles III met with the Accession Council the body that picks Britain’s new monarch via video conference before travelling to London. Charles was in Scotland and the Council was in London, necessitating a videoconference.
Can Zoom Make Money?
Zoom (ZM) is making less money. For instance, Zoom’s quarterly operating income fell from $294.60 million on 31 July 2021 to $121.74 million on 31 July 2022.
Conversely, Zoom’s quarterly gross profit grew from $719 million on 31 July 2021 to $826 million on 31 July 2022. Similarly, the quarterly revenues grew from $1.021 billion on 31 July 2021 to $1.099 billion on 31 July 2022.
Moreover, Zoom’s quarterly operating cash flow fell from $472.22 million on 31 July 2021 to $262.51 million on 31 July 2022. Hence, Zoom is bringing in less cash. In contrast, Zoom’s quarterly ending cash flow fell from $395.19 million on 31 July 2021 to -$471.08 million on 31 July 2022.
Yet Zoom can generate cash. It reported a $1.414 quarterly ending cash flow on 30 April 2022. That was down from $1.6 billion on 30 April 2021.
What Value does Zoom Have?
Zoom (ZM) had $5.169 billion in cash and short-term investments on 31 July 2021. The cash and short-term investments grew to $5.526 billion on 31 July 2022. Hence, Zoom can accumulate cash.
In contrast, Zoom’s total assets grew from $6.509 billion on 31 July 2021 to $8.048 billion on 31 July 2022. Therefore, Zoom is a growing company. Yet that growth is slowing as the pandemic winds down.
On the positive side, Zoom has a small debt that is shrinking. Notably, the Total debt fell from $100 million on 31 July 2021 to $98 million on 31 July 2022.
Thus, Zoom is a money-making company that is growing. However, I think Zoom’s value is small. My prediction is that Zoom will survive and grow, but the growth will be slight. My ultimate prediction for Zoom is that somebody, possibly Microsoft (MSFT), or Salesforce (CRM), will acquire it.
Can Fuel Costs Help Zoom?
There are some factors that could boost Zoom. Fuel prices, in particular. To explain, high gas prices provide a powerful incentive to work from home.
Notably, the average cost for a gallon of gas in the US was $3.746 on 5 September 2022, the Energy Information Agency (EIA) estimates. Fuel Prices are far higher in some areas, for example, gasoline cost $4.741 a gallon on the West Coast on 5 September 2022.
Similarly, I think the chaos in the skies and the enormous number of canceled airline flights will discourage business travel, which benefits Zoom. For example, FlightAware estimates airlines canceled 1,766 flights worldwide and 62 flights in the United States on 10 September 2022.
If you’re an employer, paying somebody to take off from work to sit at an airport waiting for a flight makes no sense. Particularly, if a Zoom meeting can achieve the same results.
I predict Zoom (ZM) has a bright future. I don’t believe Zoom will collapse. However, I don’t think Zoom will make much money in the foreseeable future. Yet, I encourage people to watch Zoom because it could soon become a cheap and moneymaking tech stock.
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