Zoom Communications Inc. (ZM): A Bull Case Theory

We came across a bullish thesis on Zoom Communications Inc. (ZM) on Value Investing Subreddit Page by mrmrmrj. In this article, we will summarize the bulls’ thesis on ZM. Zoom Communications Inc. (ZM)’s share was trading at $80.01 as of Jan 23^rd. ZM’s trailing and forward P/E were 26.58 and 14.68 respectively according to Yahoo Finance.

ZM presents a compelling investment case, trading at a 10% free cash flow (FCF) yield—a valuation level that leaves minimal downside risk. With no debt and a robust $7.7 billion cash reserve, representing 30% of the company’s market cap, concerns about financial stability are nonexistent. At this valuation, the market is essentially pricing ZM as if it will never grow earnings again, an assumption that appears overly pessimistic given the company’s strong fundamentals and opportunities for expansion.

While investor skepticism centers around limited growth prospects, the current revenue estimates, which project growth below the US and global economies, are excessively conservative. ZM remains well-positioned to capture additional market share, and its ongoing product enhancements, coupled with its potential evolution into an AI platform, provide untapped growth avenues. None of these positive factors are factored into the stock’s valuation, creating a significant disconnect.

With a highly resilient balance sheet and a business model tied to corporate spending, even modest improvements in revenue growth expectations could drive substantial upside. This is a classic Buffett-style investment, combining a strong margin of safety with asymmetric upside potential. Investors face limited absolute downside while remaining poised to benefit from positive surprises in financial performance.

Zoom Communications Inc. (ZM) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 39 hedge fund portfolios held ZM at the end of the third quarter which was 39 in the previous quarter. While we acknowledge the risk and potential of ZM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ZM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.