Shares of Zoom Communications (ZM) are up 10% on Jan. 26 after analysts at Baird estimated the company’s investment in artificial intelligence startup Anthropic could be worth as much as $4 billion.
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In May 2023, Anthropic announced a partnership with Zoom and revealed that Zoom Ventures had invested in the company. The companies did not disclose the value of the investment at that time, but Zoom reported making $51 million in “strategic investments” that quarter.
Baird’s analysts now estimate that investment went entirely to Anthropic. The startup is currently valued at $350 billion, suggesting that Zoom’s stake could see a return of roughly 78 times its initial investment, according to the analysts at Baird. Those estimates put the current value of Zoom’s investment in Anthropic at $2 billion to $4 billion, depending on dilution assumptions.
Anthropic’s Rapid Growth
“While we (and the market) have been primarily focused on ZM’s ability to gradually reaccelerate revenue growth and capture AI opportunities, the quieter, hidden gem might be its $51 million investment in Anthropic in 2023,” wrote Baird in a note to clients.
Zoom, a video conference company, was popular during the Covid-19 pandemic. But its fortunes and share price have since faded. In contrast, privately held Anthropic has seen its growth and valuation explode over the past 18 months as the AI trade has accelerated. As such, Zoom’s investment in Anthropic could prove to be a huge long-term benefit, writes Baird.
Is ZM Stock a Buy?
Zoom’s stock has a consensus Moderate Buy rating among 21 Wall Street analysts. That rating is based on 13 Buy, seven Hold, and one Sell recommendations issued in the last three months. The average ZM price target of $99.11 implies 4.78% upside from current levels.
