The Zoom Video stock price has remained in a three-year consolidation phase as concerns about its future and rising competition rose. The ZM share price has remained between the support at $58.65 and the resistance level at $95.30. It sits about 85% below the highest point on record. So, is the ZM stock a good buy ahead of its earnings next week?
Zoom Video stock wavers ahead of earnings
Zoom Video is a leading company that provides video solutions mainly to companies and organizations. Its solutions gained popularity during the COVID-19 pandemic, when governments imposed stay-at-home orders.
Zoom’s business has gone through major issues in the past few years as demand for video conversation services faded. Competition from companies like Google, Microsoft, and Cisco has also jumped.
Google, in particular, is a bigger threat because its Meet product is much cheaper than Zoom. Premium Google Meet starts at $6 per user per month and is part of a suite of other popular apps like Google Docs. Zoom starts at $15.6 per user per month.
The next key catalyst that may move the Zoom Video stock price will be the upcoming financial results scheduled on February 24. These numbers will provide more color about the company’s state and whether its business is doing well.
The results will also give more information about whether Zoom Video’s artificial intelligence features are working. Zoom’s AI features include solutions that help companies and organizations in areas like healthcare and education.
According to Yahoo Finance, the average revenue growth for Q4’25 was 3.80%, which will bring its quarterly revenue to $1.19 billion. These numbers will bring the annual revenue growth to 3.18% to $4.67 billion.
The most recent results showed that Zoom Video’s revenue rose by 3.6% to $1.17 billion as the number of firms contributing $100k in 12 months rose by 7.1%.
ZM is profitable and repurchasing stock
Zoom Video has also become a highly profitable company as management has prioritized cost cuts and efficiency. Its earnings per share (EPS) is expected to move from $5.21 in 2023 to $5.47 in 2024. It will then grow to $5.56 this year.
Zoom, as many other companies in its position, is focusing on returning cash to its shareholders through repurchases. It repurchased about 4.4 million shares in the third quarter.
Zoom also increased the share repurchase authorization by $1.2 billion to $2 billion, a sizable amount for a company valued at over $20 billion.
Share repurchases help to reward shareholders by reducing the stocks in circulation, which, in turn, boosts the earnings per share.
Zoom Video has evolved from a growth company into a value one and its valuation should reflect that. It has a non-GAP P/E ratio of 15.5, lower than the sector median of 25.
By adding its 4% revenue growth and its net income margin of 20%, we get a rule of 40 metric of 24%, signaling that the company is overvalued.
ZM stock price forecast
ZM stock chart by TradingView
The weekly chart shows that the ZM stock price has remained in a tight range in the past few years. It has remained stuck between the support at $58 and resistance at $90 in the last three years.
The stock has moved slightly above the 50-week moving average. Also, the accumulation/distribution and the smart money index (SMI) indicators have all pointed upwards, a sign that investors are accumulating.
Therefore, the Zoom stock price will likely have a strong bullish rebound in the next few months. This rebound will happen if the company publishes strong financial results, with growing earnings per share.
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