Assessing Zoom Communications (ZM) Valuation After AI Jitters And Interest Rate Concerns Weigh On Shares

Investor concerns about artificial intelligence disrupting established software providers and reduced expectations for near term interest rate cuts recently pressured Zoom Communications (ZM). The stock fell 4.4% ahead of its February 25 earnings report.

See our latest analysis for Zoom Communications.

That 4.4% drop sits against a mixed backdrop, with a 12.55% 1 month share price return and 16.19% 3 month share price return. However, the 5 year total shareholder return is still down 76.35%, suggesting recent momentum contrasts with a much weaker long term experience for holders.

If this AI focused sell off has you reassessing the sector, it could be a good moment to scan 59 profitable AI stocks that aren't just burning cash as potential alternatives to add to your watchlist.

With Zoom trading at US$91.12, sitting at a roughly 28% discount to one intrinsic value estimate and a smaller discount to analyst targets, you have to ask: is there a genuine opportunity here, or is the market already pricing in future growth?

Most Popular Narrative: 6.6% Undervalued

Zoom Communications' most followed narrative places fair value at $97.59 per share, a touch above the recent $91.12 close and enough to frame a valuation gap that relies heavily on AI and platform expansion.

Strong and accelerating adoption of AI-powered features such as AI Companion, Virtual Agent 2.0, and Contact Center Elite demonstrates growing customer reliance on advanced collaboration and productivity tools, positioning Zoom at the forefront of enterprise digital transformation; this is likely to expand the addressable market, drive multi-year revenue growth, and increase recurring revenue stability.

Read the complete narrative.

Curious what kind of growth and margin profile needs to sit behind that statement? The narrative leans on modest top line expansion, firm profitability, and a richer future earnings multiple. If you want to see how those ingredients combine into that $97.59 figure, the full narrative lays out every step.

Result: Fair Value of $97.59 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, there is still plenty that could knock this story off course, including tougher competition from larger bundled platforms, as well as uncertain appetite for paid AI features.

Find out about the key risks to this Zoom Communications narrative.

Next Steps

If this mix of AI opportunity and competitive risk feels finely balanced, it is worth taking a closer look now and weighing the trade off for yourself. Then check out 3 key rewards and 3 important warning signs to see how the key risks and rewards line up side by side.

Looking for more investment ideas?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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