Cathie Wood’s Ark Invest Places Bold Bets on a Fallen Angel, Zoom
You all know I love a good story, and this one has all the dramatic beats. Our protagonist is the high-flying Zoom, who, despite being a darling of the pandemic era, took a hard tumble with growth decelerating sharply and the stock down a massive 88% from its all-time high. Now enters our deuteragonist, Cathie Wood, the charismatic CEO and founder of Ark Invest, who’s raising eyebrows and raising stakes with her hefty bet on Zoom. Wood, undeterred by the current scenario, spots this very drawback as an exceptional buying opportunity.
Last year, Ark sketched out a valuation model that catapults Zoom to a valuation of $1,500 per share by 2026. Now, let me put that in perspective. If you park $1,000 in Zoom’s stock today, you might find yourself sitting on a fortune of $21,950 in just a few years. For the risk-takers amongst us, this could be the high-stakes gamble that could pay off big time.
Zoom’s Evolution as the Gold Standard of Communications
Zoom might have made its grand entry with its video conferencing application Zoom Meetings during the pandemic, but it has refused to be a one-trick pony. The company has evolved into a full-fledged communications platform, expanding its services to enterprise phones (Zoom Phone), conference rooms (Zoom Rooms), customer service (Zoom Contact Center), and AI software.
Speaking of AI, Zoom has not just dipped its toes but dived headfirst into the pool of artificial intelligence with its offerings – Zoom IQ for Sales and Zoom Virtual Assistant. Ark Invest predicts the broader AI software market to grow 42% annually, amounting to a whopping $14 trillion by 2030. If that’s not a goldmine of an opportunity, I don’t know what is.
Breaking Down Ark’s Valuation Model
Ark’s valuation model for Zoom is not one-size-fits-all. It’s a triad of different scenarios: the bull case, the base case, and the bear case. Each scenario assumes a different percentage of hybrid and remote knowledge workers adopting Zoom products by 2026, and projects a corresponding growth in revenue.
If you’re wondering whether these projections seem excessively optimistic considering Zoom’s recent sluggish growth, you’re not alone. But before we dismiss them outright, let’s delve into why Zoom might still be worth a punt.
Why Zoom Still Deserves Your Attention
Yes, Zoom’s financial results haven’t been particularly thrilling of late, but there are certain areas of the business that indicate a potential for accelerated growth. For instance, Zoom Phone, having broken the 10% revenue barrier, proves that Zoom is successfully diversifying beyond its core videoconferencing software.
Moreover, despite the initial spike and subsequent high churn rate amongst online/self-service customers due to the pandemic, this cohort has shown signs of stability. Coupled with a significant increase in Zoom’s remaining performance obligation (RPO) – a good indicator of future revenue – Zoom might just surprise us with a comeback.
To wrap it up, let’s not lose sight of the big picture. While the lofty returns Ark forecasts may be overly ambitious, Zoom’s competitive edge in a massive market and its current bargain price makes it a stock worth considering.
