Zoom Video Communications Inc. (NASDAQ:ZM) shares popped almost 5% on Thursday after KeyBanc analyst Steve Enders upgraded to a buy rating. Enders also raised the price target to $428 per share, citing hybrid work tailwinds.
The hybrid work environment growth prospects continue to impress after the covid-19 pandemic forced companies to adapt to a new work model. As a result, zoom shares gained more than 730% last year through October to $588.84 before pulling back to trade at the current level of $385.73.
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Although growth slowed significantly this year as people returned to work in offices, Zoom’s growth potential is still exciting. Analysts expect the company’s earnings per share to grow by about 40% this year and at an average annual rate of 15.38% over the next five years.
The company said on 18th July agreed to acquire cloud contact center company Five9 in an all-stock deal worth $14.7 billion, further expanding its share of remote corporate communications. The acquisition could yield significant synergies in the future.
Why buy Zoom shares in Q3 2021?
Although Zoom shares seem steeply valued at a price-earnings ratio of 133.60, the company’s long-term growth potential will excite growth investors. Zoom’s business model aligns well with the future of work, and analysts are optimistic the hybrid work environment could provide tailwinds for growth.
The company’s forward P/E ratio of 78.08 is still high, making it less attractive to value investors. However, shares still trade more than 30% below the current 52-week high achieved last October. Therefore, it seems that there is still room left to run before ZM stock price enters uncharted territories.
Technical overview: Zoom stock price predictions for August 2021
Zoom shares appear to have recently bounced back before retesting the 100-day moving average in the intraday chart. In addition, the stock is yet to make a full swing back to the previous high, leaving room for more upward movement.
Therefore, investors can target extended gains at approximately $396.15 or higher at $407.00. The support levels are $374.38 and $361.93.
Bottom line: the case for buying Zoom stock now
Although Zoom shares seem steeply valued at current P/E ratios, its long-term growth prospects make it an exciting choice for growth investors.
Furthermore, the current rebound is yet to enter overbought conditions in the 14-day RSI, meaning there is room for growth.
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