Zoom Stock Soars in a Curious Turn of Fate

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Ah, Zoom Communications (ZM +13.38%) – that once humble purveyor of video calls, now so ingrained in our lexicon that to “Zoom” is to speak of one’s very existence! And lo, on this fine Tuesday morn, the stock’s ascent mirrors that of an ambitious playwright’s career – as if it were destined for the grand stage. The shares have risen a full 12.7%, and the cause? A triumphant earnings report delivered the night before.

What was foretold by the seers of Wall Street? A modest $1.44 per share, paired with quarterly sales of $1.21 billion. But what did the company deliver? Oh, sweet irony, for Zoom exceeded these predictions with $1.23 billion in sales and an earnings per share of $1.52 – a fine showing, indeed.

The Droll Act of Zoom’s Third Quarter

Now, one might assume that such a triumph would bring forth a great surge in sales, but herein lies the comedy: Zoom’s sales grew by a mere 4% year over year in the third quarter. Hardly the most stirring of increases, one might say. But stay with me, for the true spectacle lies in the earnings!

Indeed, the modest sales increase was metamorphosed by Zoom into a most remarkable 204% increase in earnings per share! And yet, there is more. A “pro forma” number of $1.52 seems almost pedestrian when compared to the actual earnings, calculated according to the sacred rites of GAAP, which come in at a rather princely $2.01 per share. A delightful twist in this corporate farce!

As for free cash flow, the company seems intent on maintaining a solid performance there too, reporting $629.3 million in profit – a 30% year-over-year increase. Certainly, nothing to scoff at. However, as always, one wonders whether it is not the great art of showing the numbers rather than creating real value that drives the spectacle. The stage is set for a fine performance.

The Dilemma: Should One Buy Zoom Stock?

And what of the future, you ask? Zoom, in its wisdom, offers guidance for the fiscal year 2026: sales are forecast to exceed $4.85 billion, and pro forma profits should land between $5.95 and $5.97 per share. No mention is made of the elusive GAAP guidance, but fear not – we are promised that free cash flow shall rise to approximately $1.87 billion.

Now, let us weigh this against Zoom’s current market capitalization of $26.8 billion. The price-to-free cash flow ratio is a rather modest 14.3, and considering the 30% growth in free cash flow recently reported, one might be tempted to declare this stock cheap enough to buy. Or perhaps, like the characters of Molière’s plays, one might question whether all is as it appears in this story of financial triumph.

Is it not the way of the world that companies, like actors on a stage, must embellish their successes, hiding their flaws behind a veil of good fortune? Yet, for those with an eye to the numbers, the decision may well rest on whether one believes in the magic of this grand performance. A question for the ages, indeed. 🎭

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2025-11-25 20:42