The US market last traded at a median P/E of 15.6x, markedly below its 10Y median of 17.7x. ZM stock NTM normalized P/E and NTM FCF yields % (TIKR) We suspect that the current distribution process seeks to normalize ZM stock valuation more in line with the overall market, given its significant EPS growth normalization. Despite boasting a massive cash hoard of over $5.4B (about 21% of its market cap), ZM investors have not gotten any respite since its bull trap in October 2020.Ĭonsequently, we revise our rating on ZM stock from Buy to Sell. Therefore, we think the sell-off in ZM stock could continue further. That's when we realized that the market could have been pricing in a weaker than expected EPS growth, with the stock still priced at a premium.Īs a result, the market has continued to digest its growth premium in a slow distribution process, dragging in dip buyers before selling down further. So, we revisited our thesis to try and understand why the market has been so brutal with the ZM stock sell-off, despite its GAAP profitability.
Furthermore, the most conservative price targets of $100 didn't serve to shield ZM stock from further price declines. However, we found it interesting that the market had continued to digest its valuation, despite being GAAP profitable. We highlighted in our previous article that Zoom Video Communications, Inc.'s ( NASDAQ: ZM) bubble has burst.
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