Bulletin
Investor Alert

New York Markets Close in:

Oct. 4, 2021, 11:13 a.m. EDT

Is Zoom Video a Buy After Terminating its Merger With Five9?

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    Zoom Video Communications Inc. (ZM)
  • X
    Five9 Inc. (FIVN)
  • X
    Square Inc. Cl A (SQ)

or Cancel Already have a watchlist? Log In

Oct 04, 2021 (Baystreet.ca via COMTEX) -- Zoom Video Communications /zigman2/quotes/211319643/composite ZM -2.10% announced last week that the company would no longer be merging with cloud contact platform Five9 /zigman2/quotes/209043265/composite FIVN +1.28% . Zoom announced plans to acquire the company back in July in all-stock deal worth $14.7 billion. The move would have given Zoom a way to expand its offerings.

Investors are sometimes wary of high-priced valuations, especially since they can lead to significant dilution (such as in an all-stock deal). Since July, shares of Zoom have crashed more than 30% while the S&P 500 has remained relatively flat.

Although the acquisition would have given Zoom more opportunities to grow, the business still is in great shape, coming off a second-quarter result where sales of more than $1 billion were up 54% year over year. The company also announced the launch of Zoom Apps, making it easy to enhance the user experience by integrating other applications with Zoom's videoconferencing platform.

While there are questions about Zoom's future growth, especially as office workers eventually go back to in-person meetings, with an emergence in COVID-19 cases, virtual meetings could continue to be popular for the foreseeable future. Although Zoom is trading at a high forward price-to-earnings multiple of 55, other high growth stocks such as Square /zigman2/quotes/205989440/composite SQ -1.06% and DocuSign /zigman2/quotes/205992027/composite DOCU +1.39% trade at even more obscene multiples of 129 and 147 times future profits, respectively.

Multiple analysts have price targets for Zoom at over $370, with the stock having an average upside of around 50% from where it is today.

Although Zoom isn't a cheap growth stock to own, it's still a good buy despite the split with Five9.

COMTEX_394549962/2559/2021-10-04T11:12:30

Is there a problem with this press release? Contact the source provider Comtex at editorial@comtex.com. You can also contact MarketWatch Customer Service via our Customer Center.

/zigman2/quotes/211319643/composite
US : U.S.: Nasdaq
$ 193.57
-4.15 -2.10%
Volume: 3.35M
Dec. 2, 2021 12:18p
P/E Ratio
51.31
Dividend Yield
N/A
Market Cap
$58.95 billion
Rev. per Employee
$599,586
loading...
/zigman2/quotes/209043265/composite
US : U.S.: Nasdaq
$ 139.60
+1.76 +1.28%
Volume: 558,328
Dec. 2, 2021 12:18p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$9.38 billion
Rev. per Employee
$280,767
loading...
/zigman2/quotes/205989440/composite
US : U.S.: NYSE
$ 192.44
-2.06 -1.06%
Volume: 9.39M
Dec. 2, 2021 12:18p
P/E Ratio
180.66
Dividend Yield
N/A
Market Cap
$89.72 billion
Rev. per Employee
$1.73M
loading...
/zigman2/quotes/205992027/composite
US : U.S.: Nasdaq
$ 234.00
+3.21 +1.39%
Volume: 1.12M
Dec. 2, 2021 12:18p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$45.40 billion
Rev. per Employee
$258,090
loading...

This Story has 0 Comments
Be the first to comment

Story Conversation

Commenting FAQs »

Partner Center

Link to MarketWatch's Slice.