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Zoom Video Communications Inc ZM

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Morningstar’s Analysis

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Zoom and Five9 Terminate Merger Agreement; $252 FVE unchanged

Dan Romanoff, CPA Equity Analyst

Analyst Note

| Dan Romanoff, CPA |

Our $252 fair value estimate is unchanged after no-moat Zoom announced that it was terminating its $14.7 billion merger agreement for Five9. This is not entirely surprising after the Sept. 17 news that Institutional Shareholder Services recommended to Five9 shareholders that they vote against the merger coupled with the announcement several days later that the Department of Justice was investigating the acquisition. We view this as unfortunate, as the acquisition would have expanded the portfolio while deepening switching costs and creating cross-selling opportunities. We suspect that the company will continue to pursue smaller deals but believe national security issues will creep up again in larger transactions. Shares have been volatile, topping out at a whopping $568 nearly a year ago, but have since retreated to the point where we view them as fairly valued.

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Company Profile

Business Description

Zoom Video Communications provides a communications platform that connects people through video, voice, chat, and content sharing. The company’s cloud-native platform enables face-to-face video and connects users across various devices and locations in a single meeting. Zoom, which was founded in 2011 and is headquartered in San Jose, California, serves companies of all sizes from all industries around the world.

55 Almaden Boulevard, 6th Floor
San Jose, CA, 95113
T +1 888 799-9666
Sector Technology
Industry Software - Application
Most Recent Earnings Jul 31, 2021
Fiscal Year End Jan 31, 2022
Stock Type Aggressive Growth
Employees 5,725