Zoom Stock Could Return to Record Levels Soon

ZM options are affordably priced, too

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Zoom Video Communications, Inc. (NASDAQ:ZM) became a household name in the midst of the global pandemic, as people were forced to adjust their work, education, and social interactions to remote locations. As a result, Zoom stock skyrocketed to an all-time high of $588.84 on Oct. 19. And while the shares have taken a breather since then and the pandemic looks to slowly be coming to an end, there's reason to believe ZM can return to those record high levels from the fall.

On the charts, ZM's pullback fell just north of its 200-day moving average, a trendline that hasn't been breached on a closing basis in over 12 months. The rally has already begun; the stock is up 27% already in 2021, and could receive a bigger boost if analysts come aboard. Of the 20 brokerages covering the equity, 11 maintain a "hold" or "strong sell" stance.

ZM Stock Chart

Whether Zoom stock can reach or surpass its previous levels will likely depend on how the company plans to retain its current customer base. Zoom became a household brand name in 2020, which helped the company capture a huge portion of the new market-share. Now, at a much later phase of the COVID-19 pandemic, Zoom will have to provide users with a compelling reason to stay. The company will also need to shift and look for new ways to generate more customers and/or revenue growth in order to maintain its high value. The good news is that many companies are realizing much of office-work is obsolete and have strived to incorporate work-from-home life into a post-pandemic life.

The company currently has a market cap of $125.8 billion and a price-earnings ratio of 299.51. Zoom has nearly doubled its revenue since 2019 and has over quadrupled revenue since 2018. Its total revenue in the past 12 months stands at $622.6 million. Zoom has also improved significantly on the bottom line, going from net income of $7.5 million in 2019 to $25.3 million in 2020. Zoom beat or blew out Wall Street's earnings expectations on all quarters reported for 2020. Zoom actually reported a total earnings of $25.3 million in 2020, compared to just $7.6 million in 2019.

One thing's for sure; options are an intriguing route. Short-term options premiums on Zoom look relatively cheap at the moment, based on the equity's Schaeffer’s Volatility Index (SVI) of 61%, which ranks in the 18th percentile of its annual range. The stock also looks to have been a good target for premium buyers in the past year, based on its Schaeffer's Volatility Scorecard (SVS) of 88(out of 100). This means the shares have regularly made bigger moves than options traders were pricing in during the last 12 months.

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