What Happened?

Shares of video conferencing platform Zoom (NASDAQ:ZM) fell 9.6% in the morning session after the company reported underwhelming fourth quarter results. Revenue was just in line, but EPS managed to exceed expectations. Adding to the weakness, Zoom's full-year revenue and EPS guidance missed Wall Street's estimates. Overall, this quarter could have been better.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Zoom? Access our full analysis report here, it’s free.

What The Market Is Telling Us

Zoom’s shares are not very volatile and have only had 6 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 12 months ago when the stock gained 13.5% on the news that the company reported fourth-quarter results, with its revenue narrowly outperforming Wall Street's estimates, though EPS beat by a more convincing margin. There was also an acceleration in its new large contract wins. 

On the other hand, its full-year revenue guidance was below expectations and suggests a slowdown in demand. 

Lastly, Zoom demonstrated its focus on driving shareholder returns as its Board of Directors authorized a stock repurchase program of up to $1.5 billion of its common stock. Overall, this was a mixed quarter for Zoom. However, the market reacted very positively to the news of the share buyback.

Zoom is down 9.8% since the beginning of the year, and at $73.58 per share, it is trading 17.4% below its 52-week high of $89.03 from November 2024. Investors who bought $1,000 worth of Zoom’s shares 5 years ago would now be looking at an investment worth $687.15.

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