Shares of Zoom Video Communications (ZM, Financial) experienced a decline in price by 6.27% following the release of its fiscal third-quarter 2025 earnings results. This drop comes despite Zoom's impressive earnings beat and raised full-year guidance, as investors likely chose to take profits after a recent surge to a two-year high.
Zoom Video Communications has updated its revenue guidance to be in the range of $4.656 billion to $4.661 billion, reflecting an increase from the previously anticipated range of $4.630 billion to $4.640 billion. Furthermore, the company has raised its full-year adjusted earnings per share (EPS) expectations from $5.29-$5.31 to $5.41-$5.43. However, the year-over-year revenue growth for Q3 was modest at 3.6%, which seems to have tempered investor enthusiasm.
As of now, Zoom holds a robust $7.7 billion in cash, cash equivalents, and marketable securities, and the company projects a promising $1.6 billion in full-year free cash flow. Despite announcing a $2 billion share buyback program, Zoom's share count remains affected by stock-based compensation, which offsets the shares bought back.
In the stock analysis, Zoom's (ZM, Financial) current price stands at $83.45, with a market capitalization of approximately $25.68 billion. The stock's price-to-earnings (P/E) ratio is 29.91, reflecting market expectations of moderate growth. The GF Value places Zoom's stock as Modestly Overvalued, with a GF Value estimate of $72.31. This suggests that the stock's current trading price might not offer the most attractive valuation relative to its intrinsic value.
Despite these valuation concerns, Zoom exhibits strong financial health with an Altman Z-Score of 9.97, indicating strong financial strength, and a Piotroski F-Score of 7, which points to a very healthy situation. The company also boasts a high interest coverage ratio, affirming its capability to cover debt obligations comfortably.
Investors should weigh these financial strengths against the slowing revenue growth and valuation considerations when assessing Zoom's (ZM, Financial) stock as a potential investment.
