I never expected to say this, but shares of Zoom Video Communications (ZM 1.25%) are starting to look like a good value, if not a downright bargain. Zoom is perhaps the poster child for the "work from home" stocks that surged to unprecedented heights during the height of the COVID-19 pandemic. At one point, Zoom had a bigger market cap than Exxon Mobil, one of the world's largest energy companies, and a higher market valuation than the world's seven largest airlines put together.

In hindsight, shares of Zoom got way too frothy and the pendulum clearly swung too far in the bullish direction for many of these work-from-home stocks during that unprecedented time. But just like the market got overly exuberant about Zoom then, the pendulum seems to have swung too far in the other direction and the market now seems too bearish on Zoom. Shares plunged 15% after the company reported slowing growth and lowered its guidance during its second-quarter earnings, and the stock is now down 77% from its 52-week high of $357.93. The company reported single-digit revenue growth for the first time since 2019 and missed consensus analyst estimates for the first time since going public. But here's why the market looks like it is too bearish on Zoom. 

A person sits at a desk using a laptop.

Image source: Getty Images.

Zoom is starting to look like a... value stock?!

After the sell-off, Zoom now trades at a price-to-earnings multiple of 24. While this isn't exactly cheap from a traditional value investing perspective, it isn't egregiously expensive and is far below the levels it traded at during the pandemic. Shares are even cheaper than they look at first glance when you account for the fact that the company has $18.51 of cash per share on its balance sheet, meaning that nearly a quarter of the company's market value is in cash. In addition to this strong cash position, Zoom has a strong balance sheet with no long-term debt. Zoom trades at about seven times sales, which isn't unreasonable for a software stock that has been growing like Zoom.

A year ago, at the end of August 2021, Zoom had a market cap of over $100 billion. With a market cap of about $25 billion, Zoom looks like a much more palatable investment now and could even become an acquisition target for a larger company in the software space. It's never a good idea to buy a stock just because it could get acquired, but this illustrates the optionality that Zoom has ahead of it. 

All about enterprise 

Zoom stock sold off because growth is slowing, but it's not as if sales are grinding to a complete halt. The company grew revenue by 8% to $1.09 billion. While 8% isn't incredible revenue growth, it is growth nevertheless, and more impressive when considering that this quarter is lapping a quarter from a year ago when Zoom was still benefiting from work-from-home tailwinds. Plus, revenue was over $1 billion, making this the fifth quarter in a row that Zoom surpassed $1 billion in sales, showing the company may have more long-term sustainability than bears are giving it credit for. 

Most importantly, the company looks like it is continuing to gain traction with enterprise customers -- customers with over $100,000 in trailing-12-month revenue increased by 37% year over year. Zoom is also gaining traction with large enterprises with its Zoom Phone offering. Zoom reports that the number of Zoom Phone customers with 10,000 or more paid seats increased 112% year over year. Zoom landed its two biggest Zoom Phone customers ever during the quarter -- each of these new customers has over 125,000 paid seats. Within enterprise, the company posted an impressive 120% net dollar expansion rate over the trailing 12 months, indicating that enterprise customers are finding value in Zoom's offerings and expanding their use of Zoom over time, which is an encouraging sign for the long term. 

What does the future hold for Zoom stock?  

While some investors have understandably soured on Zoom and categorized it as a work-from-home stock whose best days are in the rearview mirror, it's not like Zoom is going to go away anytime soon. More people are returning to the office, but many companies are adopting a hybrid model in which people work from the office for a few days a week and from home on other days. Zoom will still be a valuable and necessary tool in these settings. Plus, many companies are getting pushback from employees on their return-to-office plans and may need to accept that a hybrid environment is here to stay.

In addition to collaborating with colleagues or conducting a sales call virtually, there are plenty of other growing use cases for Zoom. For example, colleges and universities have gotten great use out of Zoom as it allows them to hold classes virtually. Zoom highlighted that UCLA, one of California's largest universities, added 15,000 Zoom Phone seats to its existing Zoom license during the quarter. Additionally, Zoom highlighted that it landed a new customer in the telehealth field that will utilize its services for its over 40,000 employees and external users. 

Zoom may no longer be the hypergrowth stock that it was during the pandemic. But it is a profitable company that is still growing and offering a solution that many organizations value -- and it now looks attractive from a valuation standpoint.