Zoom is banking on hybrid work - The Average Joe


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    Zoom is banking on hybrid work


    May 31, 2022

    For many employers, hybrid work — a mix of in-office and at-home work — is becoming the norm. According to a survey by The Conference Board, only 4% of human resources leaders require employees to return to the office full-time.

    The future of work is hybrid — and Zoom wants to provide the tools of the future.

    Sentiment turns on Zoom: After a meteoric rise, $ZM is down over 70% from its peak — but analysts are turning bullish on its stock:

    • Per Daiwa Capital Markets (Barron’s), demand for its core business — video conferencing tools — is stabilizing. Its recent pullback also gives it an “attractive entry price for the stock.”
    • Daniel Morgan Senior Portfolio Manager at Synovus Trust, thinks investors are grouping Zoom with other stay-at-home stocks — not focusing enough on the fundamentals (BBG).

    Zoom wants to be more than just a video conferencing tool. Last year, Zoom tried to acquire call center software, Five9 (NASDAQ:FIVN), but the deal fell apart after the price of $ZM collapsed. Instead, Zoom announced the acquisition of Solvvy, an AI customer service business, in May.

    Fishing in a bigger pond: Unlike individuals or small business customers, Zoom makes more from enterprise customers, and they also stick around longer.

    • While smaller customers saw higher growth during COVID, enterprise sales now make up over half of Zoom’s sales — and Zoom expects the trend to continue.
    • In the recent quarter, enterprise sales grew 31%, and customers paying >$100K grew 46% compared to the first quarter of last year.

    Zoom also forecasted earnings and sales above expectations for the full year. The company is comfortably profitable with reasonable valuations — now trading at ~29x forward price-to-earnings compared to over 200x at its peak.

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