Investors may understandably feel confused about what to make of Zoom Video Communications (ZM 1.57%) stock. Investors ran up Zoom stock during the pandemic peak and then sold it off. After several periods of buying and selling, it trades at an 88% discount to its all-time high at the time of this writing.

The confusion comes in as innovation-focused fund manager Cathie Wood and her team at Ark Invest forecast a $1,500 per share price target for Zoom in 2026. That amounts to around a 2,000% increase over that time frame. But even their bear case outlook of $700 per share would amount to a 900% rise over that time. The question for investors is whether Wood and her team have set unrealistic expectations or whether Zoom can meet that target.

Zoom's ongoing struggles

Zoom's recent performance indicates a low likelihood of it hitting a $1,500 per share price anytime soon. The company grew rapidly during the height of the pandemic as individuals and businesses turned to its platform to communicate amid lockdowns and social distancing.

But as social distancing efforts relaxed, use of the platform fell, and many businesses turned to competing platforms such as Microsoft's Teams.

Consequently, revenue for the first half of its fiscal 2024 (a period that ended July 31) was over $2.2 billion, an increase of just 3% compared with the same period in fiscal 2023. This occurred as its number of enterprise (business) customers rose by 7% year over year to more than 218,000.

Still, only a small fraction of the estimated 300 million daily active users pay for the service. And unfortunately for Zoom, slowing revenue growth has been a problem for several quarters. Its top line grew by 7% in fiscal 2023.

The modest revenue increases did not stop operating expenses from rising by 15% in the first half, though Zoom managed a net income of $197 million during that period. That was a 24% annual gain, but profits only grew because of gains on strategic investments, interest income, and other investment-related sources. That all gives investors good reason to question whether the company will be able to produce sustainable earnings increases.

Furthermore, revenue growth is also on track for another modest gain. For fiscal 2024 (which ends Jan. 31, 2024), the company forecasts revenue of approximately $4.5 billion, a level only marginally higher than the $4.4 billion reported in fiscal 2023. That figure also falls well short of the $30 billion to $70 billion in revenue Wood and her team forecast by its fiscal 2027.

Why Ark Invest forecasts a massive turnaround

Considering this performance, one might understand why Zoom's price-to-sales ratio of 5 and its forward price-to-earnings ratio of 16 may not seem like bargain valuations.

However, Ark Invest is correct to point out that Zoom has ventured beyond video conferencing. Much of its innovation has focused on add-ons such as webinars, rooms, and contact centers, and the company has invested heavily in products and services enabled by AI.

As a result, Zoom has built an extensive communications ecosystem that could give it a competitive advantage, and early indications point to its potential.

Within Zoom, its AI-powered chatbot resolved 93% of issues successfully. This saved it $13 million per month while maintaining a 95% customer satisfaction score. If applied across all prospective clients, such an innovation could significantly lower call center labor costs.

Due to this technology, Wood and her team at Ark Invest believe around 43% of all Zoom users will pay for the service by its fiscal 2027. It is based on the premise of that type of growth that Wood and her team made the $1,500 per share forecast.

Bears should not dismiss Wood and Ark Invest so quickly. The fund first bought Bitcoin in 2015 at less than $250, and it has been up 100-fold since then. Additionally, Wood's prediction in 2018 that Tesla would reach a split-adjusted $266 per share later came true.

Still, given Zoom's current stock price, investors are probably not ready to believe in Wood's optimistic scenario. Unless it achieves massive increases in paying customers, that attitude seems unlikely to change.

Can Zoom rise by 2,000%?

Zoom stock could certainly rise 2,000% in three years -- history has shown that almost anything can happen in the stock market. Nonetheless, the company's current results do not point to such a growth rate.

Still, investors should stop looking at Zoom as just a videoconferencing company. Now that it has built out a full communications suite, its revenue and the number of paying customers should continue to rise. That potential makes this SaaS stock worth buying.

However, one does not need 2,000% growth in three years to beat the indexes. To match Ark Invest's forecast, most investors will probably need to see a higher proportion of the user base subscribing to pay services. Until that number grows significantly, few investors will likely hold out for a $1,500 per share stock price over the next few years.