What’s Next For Zoom Stock?

Zoom Communications (NASDAQ:ZM) recently disclosed its fourth quarter fiscal 2025 results (with fiscal year ending January), posting adjusted earnings of $1.41 per share on revenue of $1.18 billion, exceeding analysts’ expectations of $1.35 per share while meeting revenue projections. Zoom’s revenue increased 3.3% year-over-year, driven by 5.9% growth in enterprise revenue to $707 million, though online sales declined slightly by 0.4% to $477 million.

While Zoom experienced substantial user growth during pandemic lockdowns, questions have emerged about the long-term sustainability of video conferencing demand as organizations shift away from hybrid work arrangements. This trend is reflected in the 13% y-o-y reduction in enterprise customers to 192,600 during the quarter. Now, if you want an upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

Image by Biljana Jovanovic from Pixabay

The company reported an operating margin improvement of 80 basis points year-over-year, reaching 39.5% in Q4. Despite higher revenues and modest margin expansion, earnings per share decreased by one cent from the previous year’s quarter to $1.41, partly due to a 1% increase in total outstanding shares.

For the upcoming quarter, Zoom forecasts sales of $1.16 billion and earnings of approximately $1.30 per share, slightly below market expectations of $1.17 billion and $1.31 respectively.

Is Zoom Stock Fairly Valued At $75? 

ZM stock saw an 8% drop after its earnings announcement. Notably, ZM stock has performed worse than the broader market in each of the last four years. Returns for the stock were -45% in 2021, -63% in 2022, 6% in 2023, and 13% in 2024.

In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last four-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Given the current uncertain macroeconomic environment around rate cuts and ongoing trade wars, could ZM face a similar situation as it did in the last four years and underperform the S&P over the next 12 months — or will it see a recovery? From a valuation perspective, we think there’s some room for growth.

At its current price of $75, ZM stock is valued at 5.1x trailing revenues, trading below its four-year average price-to-sales ratio of 7.2x. While some reduction in valuation multiple compared to historical averages is reasonable given the company’s decelerating revenue growth and declining enterprise customer base, we believe the current gap is wide and suggests potential for share price appreciation from present levels.

While ZM stock looks like it has some room for growth, it is helpful to see how Zoom Communications’ Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 2/26/2025
[2] Cumulative total returns since the end of 2016

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