Tech Selling: My Best Stock To Buy And Hold Right Now

THElast year, Wall Street didn’t have enough Focus on video communications (NASDAQ: ZM). The stock climbed 396% in 2020, fueled by the company’s supercharged financial performance at the height of the pandemic. However, things turned around this year and the title is now 66% below its all-time high.

Sure, many tech stocks have sold sharply in recent months, but the driving force behind Zoom’s downfall is perception. Many investors still view Zoom as a “COVID action”, failing to see the company’s relevance beyond the pandemic. Fortunately, this created a buying opportunity for long term investors.

Image source: Zoom Video Communications.

More than videoconferencing

Zoom is a video-focused communications company. Its flagship product is Zoom Meetings, an app that allows people to work and engage remotely. But Zoom’s platform goes much further, offering a complete solution for voice calls, video conferencing, messaging and content sharing. To this end, the company aims to replace the existing communication infrastructure.

For example, Zoom Phone is a cloud phone system that eliminates the need for expensive on-premise hardware. And Zoom Rooms is a hybrid workforce conferencing solution, combining software and hardware to transform corporate offices into professional collaboration suites. This is particularly relevant, as only 25% of company meetings will take place in person by 2024, up from 60% today, according to a technology research firm. Gartner.

Additionally, the Zoom Development Platform is a suite of tools that enables third-party developers to build integrations and applications with Zoom. These solutions are then made available through the Zoom App Marketplace, adding Zoom functionality to popular software such as Microsoft Teams, Hub Spot, and Selling power. In short, Zoom’s comprehensive communications platform is designed to meet the needs of modern businesses, whether their employees are in the office or remotely.

On that note, Gartner recently recognized Zoom as a leader in both the meeting solutions market and the broader Unified Communications as a Service (UCaaS) industry, highlighting its successful expansion beyond video conferencing. This validates management’s growth strategy and should allay fears that Zoom will become less relevant in a post-pandemic world.

Strong financial performance

Although growth is slowing, Zoom has consistently delivered strong financial results in fiscal 2022. It should be noted in particular that Zoom Phone saw triple-digit sales growth in the last quarter and the total number The company’s customers grew 18% to 512,100.

In addition, 2,507 of these customers spent at least $ 100,000 in the past 12 months, up 94% from the previous year. It’s encouraging – these big spenders are less likely to opt out, simply because they have come to rely on Zoom so heavily.

Metric

Q3 2021 (TTM)

Q3 2022 (TTM)

Switch

Returned

$ 2.0 billion

$ 3.9 billion

100%

Free movement of capital

$ 1.0 billion

$ 1.7 billion

59%

Data source: YCharts. TTM = 12 rolling months. Note: Q3 fiscal 2022 ended October 31, 2021.

Going forward, shareholders should expect fierce competition from Microsoft, a tech titan with much deeper pockets. However, Zoom’s popularity skyrocketed during the pandemic, so much so that its brand name became a verb. And that popularity should keep the business on the radar of potential customers.

A strong corporate culture

Finally, investors should not overlook the impact of the leadership team led by the founders of Zoom. CEO Eric Yuan once said, “My number one priority is to make sure that our employees are happy, and that they can then provide happiness to our customers. And he clearly accomplished this mission.

According to Glassdoor, 88% of employees would recommend Zoom to a friend and 95% would approve of Yuan’s leadership. This effectively translated into customer satisfaction. Zoom has maintained its rate of expansion at over 130% for 14 consecutive quarters, meaning the average customer spends at least 30% more each year.

Here’s the gist: Gartner estimates that 32% of all employees will work remotely at least some of the time by the end of 2021, up from 17% in 2019. This hybrid working trend represents a significant opportunity for Zoom. In fact, management estimates its addressable market at $ 91 billion by 2025. Still, the stock is trading at just 14. times sales – its cheapest valuation since the company went public in April 2019.

Zoom is it really worth less today than before the pandemic? I do not think so. This is why now looks like a good time to buy some stocks.

10 actions we prefer at Zoom Video Communications
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* The portfolio advisor returns on November 10, 2021

Teresa Kersten, an employee of LinkedIn, a subsidiary of Microsoft, is a member of the board of directors of The Motley Fool. Trevor Jennevine has no position in any of the stocks mentioned. The Motley Fool owns shares and recommends HubSpot, Microsoft, Salesforce.com, and Zoom Video Communications. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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