Can the Zoom Dip Get Even Worse?
Zoom is never reclaiming the highs it set during the pandemic.
By Marc Guberti
Zoom Communications (ZM 0.17%) dropped by more than 20% over the past month. The pandemic bubble popped for the video conferencing company in 2021, and it looks like the stock will never reclaim those levels. The current drop doesn't seem to be over. Here's why investors shouldn't buy Zoom on the dip.
Some valuation metrics are more important than others
A 12.7 P/E ratio looks attractive on the surface. Zoom commanded a P/E ratio in the 20s for most of 2025, but growth rates have also shrunk over the years. Zoom's revenue has a five-year compound annual growth rate (CAGR) of 12.9%, but only a 3.5% CAGR over the past three years.
Revenue growth rates have steadily dropped since the pandemic, when Zoom was necessary for day-to-day communication. Zoom isn't going to get the catalyst of global lockdowns again, so it's easy to interpret its pandemic success as a one-off event.
The stalling of Zoom's revenue growth highlights the importance of looking at the PEG ratio instead of the P/E ratio. While the P/E ratio measures a stock's price compared to its earnings, the PEG ratio also includes growth rates. Zoom currently has a 4.2 PEG ratio, while a fairly valued stock typically has a 1.0 PEG ratio. Anything higher than that is usually overvalued.
It doesn't get any better
Zoom reported 5.5% year-over-year revenue growth in its fiscal 2027 first quarter, ended April 30. Its high-growth days are over, and guidance for upcoming results reflects this reality. Zoom anticipates $1.265 billion to $1.27 billion for its fiscal 2027 Q2 revenue. The high end of guidance only implies a 4% year-over-year increase.
Zoom also anticipates $5.085 billion in full-year fiscal 2027 revenue at the midpoint of guidance, which would be a 4.4% year-over-year jump. These aren't eye-catching numbers, and while a P/E ratio of 12.7 suggests setting a low bar, the PEG ratio truly captures how overvalued the stock is.
The most important red flag with Zoom is that it has become a commodity. Nvidia commands a high valuation because no one can produce similar GPUs. However, Zoom has several competitors that offer very similar experiences. Google Meet and Microsoft Teams are two viable competitors that have more generous features for free accounts and lower prices for paid plans.
Zoom's entire business model revolves around video conferencing. There are other options in the industry, and with few ways to innovate in video conferencing, Zoom doesn't have many options to generate sizable growth rates moving forward.