With just a month to go until 2022, Zoom Video Communications' (NASDAQ:ZM) stock price is down 36% so far in 2021 and down 65% from the all-time high it notched in the autumn of 2020. Suffice it to say that the economic reopening has taken its toll on the video conferencing software firm, and the company has failed to impress investors despite enduring growth. 

Nevertheless, with its latest quarterly earnings update showing that the company is still going strong, Zoom stock is cheaper than ever and is a top buy in my book for 2022.

Someone using a tablet for video conferencing.

Image source: Getty Images.

A disconnect between share price and reality?

Zoom said revenue grew 35% year over year to $1.05 billion during the third quarter of fiscal 2022 (the three months ended Oct. 31, 2021). Free cash flow was down 3% from a year ago to $375 million (due to limited spending last summer and autumn due to the pandemic), but still represented a very healthy 36% free cash flow profit margin. 

Why has the stock continued to tank following such solid news? It all has to do with momentum. Management's outlook for the fourth quarter calls for revenue of $1.051 billion to $1.053 billion, implying flat sequential revenue growth over Q3. The Q4 forecast does represent 19% growth over the fourth quarter last year (impressive considering the company grew sales 369% in Q4 last year), but Zoom is losing some steam as many people start to return to the office for work and individual users spend more in-person time with family and friends compared to 2020.

The proof is found in Zoom's customer metrics. The number of enterprises spending at least $100,000 per year with the video conferencing pioneer increased 94% year over year to 2,507, and customers with at least 10 employees grew 18% to 512,100. It isn't a product pricing issue either. Zoom said its net dollar expansion rate was 130% in Q3 among businesses with 10 or more employees, indicating the average client spent 30% more with Zoom than during the same period last autumn. Since Zoom doesn't provide specific metrics on customers with less than 10 employees and individual subscribers, it implies that Zoom's growth among its smallest user base has stalled out.

Though its trajectory is slowing, Zoom is most certainly still in growth mode. Rapid expansion among its largest customer relationships -- big enterprises spending six figures or more on an annualized basis -- is fantastic news for the company's long-term prospects. And after its epic tumble from record highs, the stock is cheaper than it's ever been at 17 times trailing 12-month revenue and 40 times trailing 12-month free cash flow. 

The cloud communications market remains hot

The fact that Zoom is still landing big deals with organizations with lots of users bodes well for continued double-digit percentage growth into the new year. Cloud-based video conferencing is a crowded space, with competitors including Microsoft Teams and RingCentral, not to mention firms like Twilio that enable developers to custom-build their own communications applications. Zoom ranks high among its peers on multiple fronts, though, leading the charge among basic meeting conference tools according to tech researcher Gartner and nipping at the heels of more complex unified cloud communications service providers like Microsoft.

For a business looking to update its communications capabilities, there are plenty of options to choose from, but Zoom is clearly winning many of these new converts to cloud video and voice. Others have picked up on this trend, as various tech researcher estimates point to video conferencing and related cloud technology growing at an annual average percentage in the low teens over the next decade. For example, legacy telecom supplier firm Ericsson announced its intent to acquire Vonage for $6.2 billion to jump-start its entrance into the cloud communications and contact center market.

Zoom failed in its attempt to acquire leading contact center technologist Five9 this past summer, but the field is still ripe for consolidation. With $5.4 billion in cash and equivalents and zero debt on balance and adding well over $1 billion in new cash on an annualized basis from its highly profitable operation, Zoom is well-positioned to continue expanding on its lead in cloud computing-based communications

Though Zoom stock keeps getting knocked down, sooner or later things will turn around if the company continues growing. With shares now trading cheaper than ever, Zoom is now in my personal top five stocks to buy for 2022.

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.