Zoom Communications, Inc. (ZM) Is a Trending Stock: Facts to Know Before Betting on It

Zoom Communications (ZM) is trending on Zacks.com, with a recent +1.7% return over the past month, underperforming the S&P 500's +7.4% gain. Despite this, Zoom holds a Zacks Rank #2 (Buy), driven by positive revisions in earnings estimates; the consensus estimate for the current fiscal year has increased by +7.8% over the last 30 days to $5.57 per share, representing a year-over-year change of +0.5% and revenue is expected to grow by 3% this year.

Analysis

Zoom Communications (ZM) has recently garnered significant investor attention, reflected by its status as a frequently searched stock on Zacks.com. Despite a modest +1.7% share price increase over the past month, ZM has underperformed both the Zacks S&P 500 composite's +7.4% gain and the Zacks Internet - Software industry's +14.8% rise. This underperformance contrasts with positive underlying fundamental signals, primarily the upward revisions in earnings estimates. The Zacks Consensus Estimate for the current fiscal year's EPS has risen by +7.8% over the last 30 days to $5.57, indicating a +0.5% year-over-year growth, while the estimate for the next fiscal year stands at $5.62, a +0.9% increase. These revisions have contributed to a Zacks Rank #2 (Buy) for Zoom. Revenue growth is projected at +3% for the current quarter to $1.2 billion, and similar low single-digit growth is anticipated for the current (+3%) and next fiscal years (+3.2%). Historically, Zoom has demonstrated a strong ability to surpass expectations, beating consensus EPS and revenue estimates in each of the trailing four quarters, with the last reported quarter showing a +2.9% year-over-year revenue increase to $1.17 billion and an EPS of $1.43, a +10% surprise. From a valuation perspective, Zoom's Zacks Value Style Score of C suggests it is trading at par with its peers.

Key Decisions for Investors

• Investors should consider the Zacks Rank #2 (Buy) and the significant positive earnings estimate revisions for Zoom, which suggest potential near-term outperformance despite recent stock price underperformance relative to the broader market and its sector.
• While the company consistently beats earnings and revenue estimates, the projected revenue and EPS growth rates are modest, in the low single digits, which should be factored into investment decisions alongside its current valuation, which is at par with peers.
• It is advisable to monitor if the positive momentum in earnings estimate revisions and the consistent earnings beats begin to translate into stronger relative stock performance, and to continue assessing valuation metrics.