Zoom (ZM) Looks to Discover Former Glory as a Value Play with Rebounding Margins

Zoom Video Communications (ZM) is a prime example of a stock that went from being a huge winner during the pandemic stay-at-home boom to a forgotten ticker in just a few years. With triple-digit top-line growth during the pandemic, it was natural for growth rates—and the stock price—to slow down as the world returned to normal. Since COVID, ZM stock has flatlined.

While investor enthusiasm has waned, Zoom’s business hasn’t collapsed; in fact, it has quietly evolved. The company managed to hold on to its customers, albeit at the cost of shrinking profit margins.

Now, with margins making a solid comeback and strong cash flow and a healthy balance sheet in place, Zoom is starting to look less like a growth play and more like a value investor’s favorite. Given its current valuation multiples and overall profile, I rate ZM as a Buy. Ultimately, this overlooked stock is worth keeping an eye on, given the potential catalysts on the horizon.

A Fresh Look at Zoom

About five years ago, Zoom was one of the hottest stocks during the pandemic, hitting a peak price of $500 in October 2020. The company’s sales jumped from $622 million in 2021 to $2.6 billion in 2022—a massive 325% increase in just one year.

Since then, the stock has declined by approximately 85% from its peak. While it’s virtually impossible to return to the dizzying heights of nearly five years ago, at current prices, Zoom could be an excellent value play.

Even though Zoom’s stock price took a big hit, its revenues didn’t drop when the pandemic ended and work-from-home trends started to normalize. The company has been growing its revenue over the past three years, although not at the explosive pace it once achieved.

Over the last twelve months, Zoom reported $4.7 billion in revenue, up from $4 billion in 2022. At the very least, Zoom has managed to retain some of the business it gained during the pandemic.

In my opinion, much of this stability comes from building the leading video conferencing platform globally—one that’s incredibly convenient compared to competitors and has created a loyal user base, especially in the corporate world.

Additionally, as a software-based, cloud-native company with over 75% gross margins, Zoom converts a significant portion of its earnings into free cash flow. It also has a cash-rich balance sheet, holding approximately $7.8 billion in cash and equivalents, with virtually no debt. This cash alone represents roughly a third of its market capitalization.

It’s worth noting that when Zoom was trading at its peak, the company sold a bunch of equity, raising around $2.6 billion between 2020 and 2021. This resulted in shareholders being diluted by roughly 235% over the last five and a half years, which also significantly contributed to the substantial decline in stock value since the peak.

Zoom’s Still in the Room, Just Quieter

While Zoom’s top line hasn’t declined since the pandemic started, the company has had to tighten its profit margins. With the post-COVID economic reopening, Zoom had to work harder to retain customers and negotiate better deals. As a result, operating margins dropped from over 30% at their peak to nearly 3% in 2023, before rebounding to around 20% today.

This recovery is a solid achievement by the management team over the past couple of years. A significant part of that success stems from the long-term agreements Zoom has signed, as reflected in a growing remaining performance obligations (RPO) balance.

Total RPOs grew 6% in the most recent quarter (1Q26), showing that Zoom isn’t losing major customers but is actually expanding its corporate client base. In fact, 4,192 customers generated over $100,000 in revenue in the last twelve months—that’s nearly 30% of the company’s total revenue and the segment where Zoom earns its best operating margins.

Additionally, Zoom has done a great job reducing churn rates, with the monthly average online churn dropping from 3.2% to 2.8% year-over-year. At the same time, the company has consistently cut costs, trimming expenses in Research and Development (R&D), marketing, and General and Administrative (G&A) areas by about 1% in the last quarter—actions that ultimately contributed to margin improvements in this slow-growth environment.

Zoom Looks Undervalued for the Cash It Generates

For its current fiscal year ending January 2026, Zoom is forecasting revenue growth of 2.6-2.8%, and free cash flow to shrink by about 2.5% at the midpoint of its guidance. These aren’t exactly exciting numbers, but they do indicate solid customer retention and the business’s maturity.

Given that profile, I think Zoom trading at around 3.4x forward EV-to-revenue—roughly 15% above the industry average—but just 12.5x forward free cash flow (compared to an industry average of 19x) seems fair for a low-growth, value-oriented company.

What makes it even more appealing is that over the last twelve years, Zoom has generated $1.78 billion in free cash flow. Based on its current enterprise value of $16.3 billion, that translates to a free cash flow yield of about 11%. For context, that’s nearly double the S&P 500 (SPY) average, which typically ranges from 5–6%, and well above the 10-year Treasury yield at 4.5%. In other words, Zoom is generating solid returns, which seems definitely better than what investors would receive from risk-free options like government bonds.

Is Zoom Video Communications Stock a Good Buy?

While sentiment is mixed, the Wall Street consensus on Zoom Video Communications (ZM) is a Moderate Buy. Among the 24 analysts covering the stock over the past three months, 9 rate it a Buy, 13 recommend Hold, and only 1 suggests a Sell. ZM’s average stock price target of $89.45 implies an upside potential of approximately 14.5% from the current share price.

See more ZM analyst ratings

Zoom’s Staying Steady and Turning Into a Value Play

While Zoom is unlikely to replicate the explosive growth it saw during the pandemic, the company has proven its ability to retain customers, deliver steady growth in remaining performance obligations (RPOs), and monetize effectively, resulting in strong cash generation.

Though it may no longer be a pure growth story, Zoom’s pristine balance sheet and increasing free cash flow generation make its current valuation appear modest. As a result, the stock is increasingly taking shape as a compelling value play, and for now, I’m leaning bullish.