Investing in Zoom

Zoom Video Communications Inc. (ZM) which joined the Nasdaq 100 Index back in April, has surpassed ExxonMobil in net worth.

On October 29^th, Zoom quoted a market valuation of $139 billion, compared to Exxon’s $138.9 billion. This valuation follows the heels of energy and oil prices plummeting amidst the COVID-19 pandemic. Accordingly, Exxon, like other oil and energy companies; has been forced to improve balance sheets, reduce staff, suspend dividends, and curtail production.

Additionally, Zoom founder, Eric Yuan’s personal fortune has soared in tandem with Zoom’s business, as millions of people relied on the application’s offerings as working from home and video-conferencing has become the norm during the on-going pandemic restrictions. Overall, Zoom is one of the best performing stocks so far in 2020, largely weathering the pandemic-induced sell-off in March and rising by more than 600% over the year. Furthermore, Zoom is forecasted to garner a $690 million in revenue for the current quarter as demand for remote work solutions are continued.

So, the question lies in weather the communication and technology company is worth investing in.

If the company can maintain its projected fiscal third quarter revenue, it would result in annual revenue of about $2.75 billion. These figures would ultimately translate to approximately $1.54 billion in free cash flow. Opposingly, even if the company’s revenue falls and the pandemic’s repercussions cease, Zoom is likely to see continued growth albeit at a much slower rate. This stems from the fact that the company was already growing its revenue at a rate of 88% year before COVID-19 hit.

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