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Why Zoom Shouldn't Fear a Growth Slump

By Demitri Kalogeropoulos, Brian Withers, and Jose Najarro – Updated Oct 18, 2021 at 5:50PM

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Sales trends are sure to slow compared to last year, but that's not a reason to avoid Zoom's stock.

Zoom (ZM -3.10%) stock has trailed the market in 2021 on fears of a jarring growth slowdown following the pandemic. But the video communication giant could navigate through a slump without sacrificing investor returns.

In this video from "The Five" from Motley Fool Live, recorded on Oct. 12, Fool contributors Jose Najarro and Brian Withers discuss Zoom's prospects for growth in a potentially slowing global economy.

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Brian Withers: For me, looking at economic conditions, I would say Zoom Video Communications. The need for communications isn't going away. Companies, regardless of where their employees are and whether they are coming back into the office or not, it's likely many of those companies and employees will continue to work from home, and so Zoom survived the coronavirus.

If I look at the valuation of Zoom, I haven't looked at it in the past week or so, but the last time I looked at it, it was valued even cheaper than it was before the coronavirus.

Every single metric of Zoom's has improved its bottom line profits, it's cash-flow, its top-line revenue, the balance sheet has more cash than ever. I think Zoom got a ton going for it and whether or not the economy is doing well, companies are going to need to have their employees communicate with each other.

Once we've let the genie out of the bag, we can work from home now and Zoom is a key part of making that happen. Excited about Zoom's future for the next 5,10 years.

Jose Najarro: Zoom has continued to release new products. There Zoom phone is growing at crazy levels I believe both internationally and domestic. Like you mentioned, Brian. Strong numbers in their balance sheets and everything else, but they also have new services to provide to their customers.

Withers: Yeah. We did a whole hour on Zoom, Jon Quast and I and you mentioned the Zoom phone. That is actually going to be a potential revenue accelerator as companies come back into the office.

Because what it does is it doesn't necessarily replace the phone that's on the employees desk.

What it does is it managed as a whole back-end of the process and allows companies not to have to get out on the phone network. It manages their own internal calling infrastructure inside of Zoom's network and coming at it from they own the video piece of it. They they own the phone piece of it.

It only makes sense. The other thing I'm excited about Zoom is I talked about Zoom rooms, where as companies come back into the office, they're going to want to every conference room to be Zoom enabled.

That's really something that isn't going to happen until people start coming back into the office. I'm not surprised it's not a big highlight yet. Lots still like there.

Jose Najarro owns shares of Zoom Video Communications. The Motley Fool owns shares of and recommends Zoom Video Communications. The Motley Fool has a disclosure policy.

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