Shares of Zoom Video Communications (NASDAQ:ZM) recently surged to an all-time high after the video conferencing company's second-quarter earnings crushed Wall Street's estimates.

Zoom's revenue soared 355% year-over-year to $663.5 million, beating estimates by $163.1 million and marking its strongest growth since its IPO last April. Its adjusted net income grew more than 11 times to $274.8 million, or $0.92 per share -- which also beat expectations by $0.47.

Zoom's post-earnings pop extended its year-to-date rally to more than 520%, and the stock has soared over 1,000% since its IPO. Let's dig into Zoom's strengths and weaknesses to see where its stock could be headed over the next 12 months.

A person uses Zoom's software on a laptop.

Image source: Zoom.

Can Zoom maintain its momentum?

Zoom's total number of customers contributing over $100,000 in revenue over the past 12 months grew 112% year-over-year during the quarter. Roughly 370,200 of its customers had over 10 employees, marking a 458% jump from a year earlier. Both metrics accelerated from the first quarter, which already benefited from stay-at-home measures during the COVID-19 crisis.

During the conference call, CFO Kelly Steckelberg noted many "small businesses and individuals adopted and maintained their Zoom licenses for various uses during the pandemic."

Zoom's adjusted operating margin also rose from 14.2% a year ago to 41.7%. It attributed that expansion to its accelerating revenue growth, which easily outpaced its growth in operating expenses, which increased 145% due to its ongoing investments and the hiring of over 500 new employees.

Zoom expects its third-quarter revenue to rise 311%-314% year-over-year, and its adjusted EPS to grow more than eightfold. For the full year, it expects its revenue to rise 281%-284% as its adjusted earnings increase roughly sevenfold, which are both higher than its previous estimates in June.

It's irrational to expect Zoom to maintain these triple-digit growth rates into fiscal 2022, which starts at the end of January 2021. But it's also difficult to gauge how much of that momentum will remain after the pandemic ends. For now, analysts expect Zoom's revenue and adjusted earnings to rise 29% and 15%, respectively, next year -- which are still robust (but hardly jaw-dropping) growth rates.

The main challenges for Zoom

The biggest challenge for Zoom is its valuation. As of this writing, it trades at just over 50 times this year's sales and nearly 40 times next year's sales. In terms of profits, it trades at over 170 times this year's earnings and more than 150 times next year's estimate.

A woman uses Zoom's software in an office.

Image source: Zoom.

Those bubbly valuations could limit Zoom's upside potential, and its enterprise value of over $90 billion will likely discourage any company from trying to buy it out.

Another issue is the competition. Zoom's success is attracting a growing number of well-funded challengers, including Cisco's (NASDAQ:CSCO) Webex, Microsoft (NASDAQ:MSFT) Teams, Facebook's (NASDAQ:FB) Messenger Rooms, and Alphabet's (NASDAQ:GOOG) (NASDAQ:GOOGL) Google Meet. All these rivals can afford to undercut Zoom's paid services with free alternatives and bundle their video platforms with other services.

Lastly, Zoom has suffered plenty of growing pains over the past year, as privacy and security flaws convinced big companies, government agencies, and some users to stop using the service. Zoom subsequently beefed up its security features, but the platform could still face other growing pains as its user base expands at triple-digit rates.

Where will Zoom be in a year?

Looking ahead, the accelerated shift toward remote work and online education could continue after the crisis ends. Companies, schools, and government agencies will likely realize it's more economical to perform some tasks remotely via Zoom or other collaboration tools.

Meanwhile, Zoom's security deal with Crowdstrike, its cloud deal with Oracle, and other partnerships could strengthen its growing ecosystem and silence the critics. That continued expansion could provide Zoom with a firm foundation to launch other collaboration services -- which would widen its moat against Microsoft, Cisco, Google, and other enterprise giants.

But even if all those things happen, Zoom's stock could be held back by its frothy valuations. It will face some very difficult year-over-year comparisons next year, and even a slight miss could pop its bubble. In short, Zoom's stock might head higher over the next 12 months, but the risks significantly outweigh the rewards at these nosebleed levels.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.