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ARK’s price target for Zoom is $1,500 per share in 2026

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ARK’s price target for Zoom is $1,500 per share. This is the result of an analysis based on ARK’s open-source research and model. Zoom’s share price is to reach $1,500 by 2026. The closing share price on June 11, 2022, was $109,07. Cathie Woods predicts that the share price of Zoom will increase by a multiple of almost 14 within four years. Tuned to the 75th and 25th percentile Monte Carlo outcomes, ARK’s bull case is $2,000 per share, while the bear case is $700 per share – both predictions are for 2026.

The following analysis is by Will Summerlin, Analyst; Andrew Kim, Analyst Intern and Brett Winton, Director of Research

ARK’s open-source research and model

According to ARK’s open-source research and model, Zoom’s (ZM) share price could approach $1,500, compounding at a 76% annual growth rate, in 2026.[1]

Tuned to the 75th and 25th percentile Monte Carlo outcomes, our bull and bear cases are $2,000 and $700 per share, respectively, as shown below.[2]

As with the ARK’s open-source Tesla model, we are publishing our open-source Zoom model to strengthen the quality of our research. By sharing our assumptions and modeling methodologies, we hope to solicit constructive feedback and criticism. As with open-source software, we believe that open-source research will prove to be more robust and accurate than research conducted non-transparently behind closed doors.[3]

Zoom Price Targets: Expected (Base), Bear, and Bull Cases Per Share

ARK’s Simulation OutputsARK’s 2026 Price Estimate (Per Share)Significance
Expected Value$1,500This projection is our expected value for Zoom’s share price in 2026 based on our Monte Carlo analysis.
Bear Case$700We believe that there is a 25% probability that Zoom could be worth $700 per share or less in 2026.
Bull Case$2,000We believe that there is a 25% probability that Zoom could be worth $2,000 per share or more in 2026.

Source: ARK Investment Management LLC, 2022

For the benefit of readers, this article presents “expected value” (or “base case”), “bear case,” and “bull case” as a way of contextualizing the meaning of our 2026 share price expectations. Methodologically, we arrive at our base-case share price by averaging ten thousand simulations produced by our Monte Carlo model. Our bear and bull cases are the 25th and 75th percentile values, respectively. Forecasts are inherently limited and cannot be relied upon as a basis for making an investment decision and are built on our modeling that reflect our biases and long-term positive view of the company. Please see additional disclosures below on forecasts and hypothetical performance. For informational purposes only and should not be considered investment advice, or a recommendation to buy, sell, or hold any particular security.

This research extends our 2021 analysis of Zoom’s potential total addressable market opportunity. In this article, we detail our open-source model that presents possible outcomes for Zoom’s business over the next five years.

ARK’s open-source Zoom model simulates eight independent inputs to forecast a range of price targets. In our view, four of those inputs are the most important drivers for the business, as shown in the corresponding colors below.

Zoom Monte Carlo analysis

Source: ARK Investment Management LLC, 2022

Forecasts are inherently limited and cannot be relied upon as a basis for making an investment decision and are built on our modeling that reflect our biases and long-term positive view of the company. Please see additional disclosures below on forecasts and hypothetical performance. For informational purposes only and should not be considered investment advice, or a recommendation to buy, sell, or hold any particular security. Note: For each case noted above, we average the inputs that correspond to the specified price targets within a one percentage point deviation. For example, our Monte Carlo simulations yield a bear case price target of $700 per share. We average all specified outputs in the above chart across all Monte Carlo iterations that produce a price target that is greater than or equal to $700 * 0.99 and less than or equal to $700 * 1.01.

In this article, ARK outlines four topics relevant to Zoom’s valuation as well as the risks and limits of our assumptions, below:

  • Example Bear And Bull Outcomes
  • Key Model Assumptions
  • Model Assumptions That Are Not Key Drivers Of Our Zoom Price Estimates
  • Business Opportunities Not Included In The Model

Example Bear and Bull Outcomes

We do not provide a single bull or bear case because we dimension the bull and bear outcomes as the 75th and 25th percentile output from ten thousand simulations. Nonetheless, the table below presents what we believe are good examples of each.[4]

Example Output [*]2021 Actual [**] / ARK EstimatesExample Bear Outcome 2026Example Bull Outcome 2026
Global Knowledge Workers with a Hybrid/Remote Working Model [***]489M820M850M
Global Hybrid/Remote Knowledge Workers Using Zoom212M250M320M
Paying Zoom Users36M90M180M
ARPU [****]$113$310$430
Total Revenue (Billions)$4$30$70
Adjusted Gross Margin [*****]71%87%89%
Adjusted EBITDA Margin [******]38%42%46%
Unlevered Free Cash Flow Margin35%25%27%
Enterprise Value / EBITDA24x [*******]20x20x
Market Cap (Billions)$32 [********]$240$680
Share Price and CAGR$108 [*********]$700 (49%)$2,000 (87%)

Source: ARK Investment Management LLC, 2022

In the table above, we share the average outputs of all scenarios from our ten thousand simulations that correspond to the 25th and 75th percentile share price within a one percentage point deviation. Please note, however, that there are multiple discrete outcomes within our ten thousand simulations that could correspond to the bull and bear price targets. Forecasts are inherently limited and cannot be relied upon as a basis for making an investment decision and are built on our modeling that reflect our biases and long-term positive view of the company. Please see additional disclosures below on forecasts and hypothetical performance. For informational purposes only and should not be considered investment advice, or a recommendation to buy, sell, or hold any particular security. *Note: With the exception of results and estimates for the 2021 calendar year, all percentages and multiples are rounded to the displayed second digit for simplicity and are consistent with reasonable variance in the forecast. All other figures are rounded to the displayed first digit. **Note: The actual results of Zoom’s operations in 2021 correspond to results as of the end of their 2022 fiscal year. The first four lines of outputs within this column are ARK’s own estimates. ***Note: Our historical estimates and forecasts for global knowledge workers excludes knowledge workers residing in mainland China. ****Note: We define ARPU as the average revenue per paying user, or, put differently, the average annual spending per knowledge worker who pays to use Zoom. Please note that this definition of ARPU excludes knowledge workers who do not pay to use Zoom. *****Note: We assess historical gross margins after adding back cost-of-goods sold (COGS)-related stock-based compensation expenses to reported GAAP gross profit. ******Note: We assess historical EBITDA margins after adding back operations-related stock-based compensation expenses to reported GAAP operating profit, plus reported GAAP depreciation and amortization. *******Note: Earnings before interest, taxes, depreciation, and amortization (EBITDA). Current EV / EBITDA is as of June 1, 2022, at market close. ********Note: Current market capitalization is as of June 1, 2022, at market close. *********Note: Compound Annual Growth Rate (CAGR). Current share price is as of June 1, 2022, at market close.

Key Model Inputs

The following table presents key inputs to our forecast along with the upside and downside range of expectations.

Key Model Input Ranges [*]2021 ARK EstimatesDownside (-1 standard deviation)Upside (+1 standard deviation)
% Adoption of Hybrid/Remote Working Models by Global Knowledge Workers (excluding Mainland China) [**]51%60%90%
Zoom’s Share of Hybrid/Remote Knowledge Workers [***]43%20%50%
Zoom’s Monetization Rate [****]17%20%80%
ARPU$113$188$532

Source: ARK Investment Management LLC, 2022

Forecasts are inherently limited and cannot be relied upon as a basis for making an investment decision and are built on our modeling that reflect our biases and long-term positive view of the company. Please see additional disclosures below on forecasts and hypothetical performance. For informational purposes only and should not be considered investment advice, or a recommendation to buy, sell, or hold any particular security. *Note: To specify the distributions of inputs across our Monte Carlo simulations, we define the “downside,” “downside case,” or “downside projection” for any given input as our forecast for one standard deviation below our forecasted mean. Similarly, we define the “upside,” “upside case,” or “upside projection” for any given input as our forecast for one standard deviation above our forecasted mean. Henceforth, we define the forecasted mean for any given input in our Monte Carlo simulations as the “mean projection.” **Note: This input refers to our forecast of total knowledge workers in a hybrid or fully remote working arrangement divided by our forecast of total knowledge workers globally. Note that, for the purposes of modeling Zoom’s business opportunity, both terms exclude knowledge workers residing in mainland China. ***Note: This input refers to our forecast of total Zoom users as a percentage of the first input, or total addressable knowledge workers in hybrid or fully remote working arrangements, excluding knowledge workers residing in mainland China. **** Note: We define Zoom’s monetization rate as our forecast for the number of paying users of Zoom divided by total Zoom users.

Adoption of Hybrid/Remote Working Models

In June 2021, Gartner projected that 51% of knowledge workers worldwide would adopt either a hybrid or a fully remote working model by the end of that year.[5] By January 2022, Slack estimated that approximately 58% and 12% of all global knowledge workers worked in hybrid or fully remote arrangements, respectively, while ~30% worked in a business office outside of the home every day.[6] Although a perceived decline in the severity of Covid influenced many firms to reopen offices and reinstate 100% in-office mandates, which lowered the penetration of hybrid/ remote working models to 66%, we believe that knowledge worker backlash and talent shortages will compel employers to adopt more flexible arrangements.[7] Slack reports that employees forced to return to the office full-time experienced the steepest declines in work-life balance and overall satisfaction compared to their hybrid/remote peers, suggesting that in-office mandates will lead to high rates of attrition.[8]

We believe current pivots back to in-office mandates could be part of a trial-and-error process for employers that will increase the percent of workers in hybrid/remote working models during the next five years. In our mean projection, we expect 75% of all global knowledge workers to participate in such arrangements, up from 51% in 2021. Excluding knowledge workers from mainland China, we estimate that the addressable number of knowledge workers will grow 11% at a compound annual rate, from 489 million in 2021 to 832 million in 2026, as shown below.[9]

Global hybrid/remote knowledge workers

Source: ARK Investment Management LLC, 2022

Forecasts are inherently limited and cannot be relied upon as a basis for making an investment decision and are built on our modeling that reflect our biases and long-term positive view of the company. Please see additional disclosures below on forecasts and hypothetical performance. For informational purposes only and should not be considered investment advice, or a recommendation to buy, sell, or hold any particular security.

Zoom’s Video Communications Traffic Share

To estimate Zoom’s market share of addressable knowledge workers with a hybrid/remote working model, we exclude those located in mainland China and use Zoom’s historical market share of total video conferencing domain traffic on desktops, not “in-app” activity. According to Similarweb, Zoom’s market share dropped from 52% in 2019 to 48% in 2021, suggesting that increasing competition from other collaboration and communication suite providers could limit Zoom’s future penetration of global knowledge worker activity.[10] That said, we expect the company to remain a dominant provider of cloud-based communications during the next five years.

Using Similarweb’s estimates for total unique Zoom users from 2019 to 2021, our model estimates that Zoom’s market penetration increased from 8% in 2019 to 45% during the onset of the pandemic in 2020, and then slipped back to 43% during the reopening in 2021.[11] Our mean projection is that Zoom will continue to lose share linearly, approximately one percentage point per year to 35% in 2026––a forecast that incorporates current competitive dynamics across communication, collaboration, and productivity software providers.

In the chart below, we detail our base, downside, and upside projections for total unique Zoom users. In our mean projection, we expect the number to increase 7% at a compound annual rate from 212 million — or 43% of the current addressable market – to 291 million – or 35% of the total addressable market – by 2026. In our downside projection, we expect total unique users to decrease 5% at an annual rate to 166 million – or 20% of the total addressable market. Finally, in our upside projection, we expect total unique users to increase 14% at an annual rate to 416 million – or 50% of the total addressable market.

Zoom's share of addressable knowledge workers

Source: ARK Investment Management LLC, 2022; Similarweb, LTD (https://www.similarweb.com/)

Forecasts are inherently limited and cannot be relied upon as a basis for making an investment decision and are built on our modeling that reflect our biases and long-term positive view of the company. Please see additional disclosures below on forecasts and hypothetical performance. For informational purposes only and should not be considered investment advice, or a recommendation to buy, sell, or hold any particular security.

Zoom’s Monetization Share of User Base and ARPU

In our view, the most important driver of its business is Zoom’s ability to monetize its users. We estimate past monetization rates by dividing Zoom’s reported annual revenue by our estimate of its average revenue per paying user (ARPU). Zoom Meetings Pro, a plan that offers only video conferencing and chat functionality for up to 100 participants, is its least expensive offering: priced at $180 per year, per license from 2017 to 2019, and then $150 from 2020 to 2021.[12] With Zoom Meetings Pro as an ARPU baseline, we apply an additional 25% discount for enterprise bulk purchases. As shown in the chart below, we estimate that approximately one million people, or 24% of total Zoom users, paid for the service in 2017. Because of the coronavirus crisis, the number of paying Zoom users grew roughly 40-fold to its peak, then settled at 36 million – or 17% of total Zoom users – by the end of 2021.

In our view, these historical ARPU estimates are conservative, pushing our estimate of paying Zoom users to the upper bound. That said, we expect the number of paying users to grow in tandem with the overall growth in the addressable market, particularly if Zoom continues to invest in sales and marketing to increase the share of enterprise in its user base. Our mean projection assumes that the majority of Zoom’s users are enterprise customers, and that 50% of the total Zoom user base is paying by 2026. In other words, by 2026 at least one party in any Zoom call will be a paying user with enhanced Zoom functionality as opposed to all parties with limited and free capabilities. In our downside and upside projections, we expect 20% and 80% of Zoom users to convert to paying users by 2026.

Paying users of Zoom

Source: ARK Investment Management LLC, 2022; Similarweb, LTD (https://www.similarweb.com/)

Forecasts are inherently limited and cannot be relied upon as a basis for making an investment decision and are built on our modeling that reflect our biases and long-term positive view of the company. Please see additional disclosures below on forecasts and hypothetical performance. For informational purposes only and should not be considered investment advice, or a recommendation to buy, sell, or hold any particular security.

The relationship between Zoom’s monetization rate and our price targets is shown in the chart below. In 5% increments, we plot a potential range of paying Zoom users as a percent of global hybrid/remote knowledge workers against the corresponding average per-share price in our simulations. In the majority of our simulation outcomes, Zoom’s monetized penetration of the addressable market ranges between 5% and 20% in 2026. For perspective, according to our estimates Zoom monetized 7% of the addressable market in 2021.

Zoom Monte Carlo Monetization Distribution

Source: ARK Investment Management LLC, 2022

Forecasts are inherently limited and cannot be relied upon as a basis for making an investment decision and are built on our modeling that reflect our biases and long-term positive view of the company. Please see additional disclosures below on forecasts and hypothetical performance. For informational purposes only and should not be considered investment advice, or a recommendation to buy, sell, or hold any particular security. Note: The circles shown in the chart above correspond to each of the 5% buckets of paying Zoom users as a percentage of global hybrid/remote knowledge workers, excluding mainland China. Their size variation indicates each bucket’s proportion of our 10,000 Monte Carlo simulations.

Two major contributors to our 2026 ARPU forecast are (1) Zoom’s core video conferencing, phone, and chat offering and (2) Zoom’s future suite of AI-enabled products and services. In all three price-target cases, we expect the average spending per paying user of Zoom’s video conferencing product to increase from $113 today to $188 in 2026, derived from the current cost of Zoom’s least expensive bundled offering, Zoom United Pro, and an enterprise discount of 25%. As enterprises continue to rip-and-replace legacy communications systems like on-premises phone and video, we expect that customers of Zoom’s core products will switch from video conferencing-only to a bundled solution containing video conferencing, phone, and chat. Similarly, we expect Zoom to land new customers who will pay for “Zoom United” instead of purchasing core products separately. In our downside projection, paying users will purchase only the basic bundled product, still pushing ARPU up at an 11% annual rate from $113 in 2021 to $188 in 2026.

In April 2022, Zoom announced the release of Zoom IQ, analytics powered by conversational AI which, as of now, is targeted only at sales teams.[13] Along with audio and/or video communications, AI-powered analytics should increase productivity across knowledge workers substantially. In our mean projection, the average paying user will spend $94, or 50% of the total cost of Zoom’s core products, on Zoom IQ and AI-related products and services. In our upside projection, the average paying user will spend $188, or 100% of the total cost of Zoom’s core products, on those services. In other words, Zoom IQ and future AI-related products and services represent 26% and 35% of forecasted ARPU in our mean projection and upside projection, respectively, in 2026.

Further, organizations might rely increasingly on cloud-based streaming solutions like Zoom’s Webinar and Zoom Events to support their online-only and online-optional large-scale events. Both services provide high audiovisual quality and availability and should become dominant and trusted solutions.[14] In our mean and upside projections, we estimate that, for every 1,000 and 500 knowledge workers using Zoom, the average enterprise will pay for one Zoom Events license for up to 10,000 participants. In our mean projection, Zoom’s webinar and events solution adds $63 to ARPU, or 18% of total ARPU. In our upside projection, the solution adds $127 to ARPU, or 24% of total ARPU.

Because of limited public disclosures from Zoom and third-party data, we assume conservatively that the impact of Zoom Rooms and Zoom’s new contact center solution will not be significant,[15] [16] though in our mean and upside projections we expect them to contribute $11 and $30 to ARPU, respectively, representing 3% and 6% of total ARPU in each case.

Based on our forecasts for the business lines shown below, ARPU is likely to increase 26% at an annual rate during the next five years, from $113 per year in 2021 to $356 in 2026. In our upside projection, we expect ARPU to grow 36% at an annual rate to $532 per paying user.

Zoom 2026 ARPU

Source: ARK Investment Management LLC, 2022

Forecasts are inherently limited and cannot be relied upon as a basis for making an investment decision and are built on our modeling that reflect our biases and long-term positive view of the company. Please see additional disclosures below on forecasts and hypothetical performance. For informational purposes only and should not be considered investment advice, or a recommendation to buy, sell, or hold any particular security.

Model Assumptions That Are Not Key Drivers Of Our Zoom Price Estimate

Adjusted Gross Margin

To grasp the relationship between Zoom’s gross margins and total Zoom users historically, we plotted the relationship between Zoom’s historical adjusted cost of goods sold (COGS), adding back the COGS-related stock-based compensation expense, against total Zoom users, as shown below.

We fit the datapoints to a linear trendline from 2017 to 2021, or fiscal years 2018 to 2022, excluding a point in fiscal year 2021 that seems to have been an outlier related to atypical growth during the early months of the COVID-19 pandemic. We then incorporated our forecast for total Zoom users in 2026 into the trendline to produce the COGS forecast.

That said, as Zoom scales, a linear relationship between the two variables might not hold: the trendline outputs become too aggressive and result in an unlikely scenario in which Zoom grows without investing incremental capital back into COGS.

Annual total Zoom users vs. COGS

Source: ARK Investment Management LLC, 2022

Forecasts are inherently limited and cannot be relied upon as a basis for making an investment decision and are built on our modeling that reflect our biases and long-term positive view of the company. Please see additional disclosures below on forecasts and hypothetical performance. For informational purposes only and should not be considered investment advice, or a recommendation to buy, sell, or hold any particular security.

To avoid that unlikely scenario, we modeled the trendline as the minimum COGS relative to a maximum adjusted gross margin. We then treated the difference in maximum adjusted gross margins between years as the source of additional reinvestment in Zoom’s technology stack.

In our mean projection, we assumed that 30% of the annual percentage point differential, which averages five percentage points per year from 2022 to 2026, will be reinvested into COGS, implying an adjusted gross margin in the range of 87% and 89%. We see the gross margin forecast as conservative, in line with Zoom’s pre-COVID gross margin expansion.

Zoom adjusted gross margin

Source: ARK Investment Management LLC, 2022.

Forecasts are inherently limited and cannot be relied upon as a basis for making an investment decision and are built on our modeling that reflect our biases and long-term positive view of the company. Please see additional disclosures below on forecasts and hypothetical performance. For informational purposes only and should not be considered investment advice, or a recommendation to buy, sell, or hold any particular security.

The gross margins of software companies with $750 million or more in revenue suggest that this gross margin assumption is not out of line, as shown below. In our view, Zoom’s adjusted gross margin will improve from 71% last year to nearly 90% in the next five years for two reasons: first, economies of scale in a software-only business model and, second, paying enterprise customers supplanting Zoom’s free user base.

Gross Margin
CompanyLatest Fiscal QuarterLatest Fiscal Year
The Sage Group PLC94%93%
ANSYS Inc.92%90%
Autodesk Inc.92%92%
Dolby Laboratories Inc.91%90%
Cadence Design Systems Inc.89%90%
Adobe Inc.88%88%
Check Point Software Technologies Ltd.88%89%
Paycom Software Inc.87%87%
UiPath Inc.86%81%
NortonLifeLock85%86%

Source: ARK Investment Management LLC, 2022, S&P Global Inc.

For informational purposes only and should not be considered investment advice, or a recommendation to buy, sell, or hold any particular security.

Adjusted EBITDA Margin And Adjusted Unlevered FCF Margin

Based on healthy operations during the next five years, we believe that Zoom will reach an adjusted EBITDA margin approximating half its gross margin.[17] During 2020 and 2021, Zoom’s adjusted EBITDA margins were 37% and 38%, respectively, more than half the 53% and 54% adjusted gross margins in those years. Moreover, its $5.3 billion in net cash as of 2022 fiscal year end is unlikely to pose a material constraint on Zoom’s growth.

According to our research, Zoom’s adjusted unlevered free cash flow (FCF) margins were 57% and 35%, respectively, during 2020 and 2021, based on adjusted gross margins of 81% and 50%. In our view, Zoom will deliver adjusted unlevered free cash flow (FCF) margins at ~60% of its adjusted gross margins during the next five years.[18]

EV / EBITDA Multiple

To forecast its valuation in 2026, we assume that Zoom’s EV/EBITDA multiple will approximate 20x across all scenarios. Based on the top software-centric technology companies, we believe that our 20x multiple is reasonable, assuming market valuation of technology companies normalizes within the next five years.

CompanyEV / Forward EBITDA [*]Latest Fiscal Year Revenue [**]
Microsoft Corporation18.3x168,088
Oracle Corporation11.3x40,479
SAP SE11.8x31,664
Salesforce Inc.19.3x26,492
Adobe Inc.21.6x15,785
VMware Inc.12.8x12,851
Intuit Inc.21.5x9,633
NCR Corporation7.1x7,156
ServiceNow Inc.38.1x5,896
Dassault Systèmes SE24.0x5,527
Workday Inc.23.5x5,139
Constellation Software Inc.17.4x5,106
SS&C Technologies Holdings Inc.10.8x5,051
Autodesk Inc.24.3x4,386
Mean18.7x
Median18.8x

Source: ARK Investment Management LLC, 2022, S&P Global Inc.

*Note: Multiples are as of June 1, 2022, at market close. **Note: Revenues are reported in millions of US dollars. For informational purposes only and should not be considered investment advice, or a recommendation to buy, sell, or hold any particular security.

Share Dilution

Given its significant cash position, we believe Zoom is unlikely to issue new shares outside of predetermined stock-based compensation plans. In our mean forecast, we assume 2.5% share dilution per year, within a band of 3.5% and 1% in our downside and upside projections, respectively.

Business Opportunities Not Included In The Model

We have excluded additional business lines that could be meaningful to Zoom’s business model.

AI-Enabled Productivity Suite

While we incorporate Zoom IQ and future AI-related products and services into our ARPU forecasts, our conservative Zoom model excludes future monetization of AI-enabled tools, from conversational AI analytics and workflow automation to virtual secretaries/assistants. That said, we do believe that AI will boost the growth in industry software spending to 42% at a compound annual rate during the next eight to 10 years, catapulting it from ~$1 trillion in 2021 to ~$14 trillion in 2030, as shown below.

AI software spend and labor output increase

Source: ARK Investment Management LLC, 2022.

Forecasts are inherently limited and cannot be relied upon. | For informational purposes only and should not be considered investment advice, or a recommendation to buy, sell or hold any particular security. Forecast excludes China. Source: ARK Investment Management LLC, 2021 analysis based on company derived statistics and data sourced from the US Bureau of Labor Statistics. “Occupational Employment and Wage Statistics.” Gartner, and McKinsey Global Institute. “A Future That Works: Automation, Employment, and Productivity.

According to ARK’s research, AI could boost knowledge worker productivity by ~33% during the next five years.[19] If the average knowledge worker’s salary were to average $32,000 in 2026 and enterprises were willing to pay them ~25% of the incremental revenue associated with their productivity gains, Zoom’s AI products could boost the knowledge worker’s salary by ~$2,600 (25%*33%*$32,000).[20]

With productivity gains from both hybrid/remote communications and AI, Zoom should be well-positioned to monetize its user base. Indeed, our model probably underestimates Zoom’s ARPU growth potential over the next five years.

Conclusion

Based on the analysis presented in this article, ARK’s price target for Zoom is $1,500 per share in 2026. Our bear and bull cases suggest that Zoom could be worth ~$700 and ~$2,000 per share in 2026, respectively.

ARK has published its open-source model on Github and invites readers to explore, test assumptions, and/or craft visualizations in the simulations.

Footnotes

1 We use $107.65, Zoom’s share price as of June 1, 2022, at market close to compute the compound annual growth rate from the aforementioned date to January 31, 2027, or the end of Zoom’s 2027 fiscal year. Throughout the article and for simplicity’s sake, we refer to the 2026 calendar year and Zoom’s 2027 fiscal year as comparable and regard the one-month difference between the two periods as negligible for modeling purposes.

2 Throughout this article, we round the Monte Carlo price per share outcomes to the nearest hundred. Exact outcomes can be found within our open-source model.

3 A Note To The Reader: This forecast relies on data that have not been verified, and are subject to numerous criteria, assumptions, risks and limitations that are inherently uncertain, and there will be variations with real life that could cause substantially different results. The forecast includes assumptions on gross margin and capital efficiency, and certain other metrics, which are subject to change or revisions over time, that are influenced by ARK’s subjective judgments and biases that heighten the risks and limit the uses of the forecast as a decision making tool. Given the unpredictable nature of markets and other future events, relying on forecasts is inherently risky. While we believe that there is a sound basis for the forecast presented, no representations are made as to their accuracy, and there can be no assurance that such forecasts or returns will be achieved or align with any actual results. A recipient should not consider these forecasts alone in making an investment decision. These forecasts do not reflect any fees or expenses related to owning Zoom shares. ARK related persons and ARK clients can own Zoom shares, and therefore ARK has an incentive and interest in the value of these shares, and ARK and its related persons can receive asset- and performance-based fees on the value of these shares in an ARK client’s portfolio, meaning if share prices rise, ARK can earn more fees. ARK’s related persons can make investment determinations that conflict with determinations made on behalf of ARK clients, and that are aligned with, contrary to or differ from the information contained herein. For more information related to ARK’s conflicts of interest, please see ARK’s Form ADV Part 2A.

4 Instead of providing single simulation outputs that correspond to our downside and upside price per share, we average all iterations of each output that correspond to the downside and upside price per share within a one percentage point deviation. Please refer to the supporting notes for the chart entitled “Zoom Monte Carlo Analysis: Primary Drivers Of ARK’s 2026 Price Target” for additional information.

5 Laurence Goasduff, “Gartner Forecasts 51% of Global Knowledge Workers Will Be Remote by the End of 2021.” Gartner Inc., Gartner Forecasts 51% of Global Knowledge Workers Will Be Remote by the End of 2021

6 “Leveling the playing field in the hybrid workplace.” Slack Technologies LLC.

7 “Inflexible return-to-office policies are hammering employee experience scores.” Slack Technologies LLC.

8 Ibid.

9 Our estimate and forecast for the number of global knowledge workers adopting a hybrid/remote working model.

10 Similarweb is a third-party digital intelligence data platform that provides web analytic services.

11 Please note again that 43% refers to our estimate of total unique users, whereas Zoom’s 48% market share, mentioned in the above paragraph, refers to market share with respect to total video conferencing volume.

12 We consulted the Wayback Machine (Internet Archive: Wayback Machine) to gather archived versions of Zoom’s pricing page (Video Conferencing, Web Conferencing, Webinars, Screen Sharing) at the end of each calendar year to confirm the listed price of Zoom United Pro.

13 Theresa Larkin, “Zoom IQ for Sales: Conversational Intelligence for Sellers.” Zoom Video Communications Inc.

14 Please refer to our September 30, 2021, analysis of Zoom (Zoom: The Fabric Connecting Global Enterprise Communications) for a more in-depth, quantitative comparison between Zoom and its peers.

15 Zoom Rooms” refers Zoom’s conference room software, which enables cloud-based communications with a variety of features from physical rooms in-office. Please refer to Zoom’s Zoom Rooms page (Zoom Rooms Video Conference Room Solutions – Zoom) to learn more. For more information about Zoom’s proprietary contact center solution, announced in February 2022, please refer to endnote 14.

16 Heidi Elmore, “Introducing Zoom Contact Center.” Zoom Video Communications Inc.

17 We calculate adjusted EBITDA after adding back all stock-based compensation expense related to COGS and operating expenses.

18 Zoom uses adjusted EBITDA in its own calculations. Our model, therefore, qualifies FCF as adjusted FCF.

19 Our forecast for productivity increase in 2026 derives from ARK’s internal research on the artificial intelligence market as presented in ARK’s Big Ideas 2022 (Big Ideas Report: Innovation Research by ARK Invest).

20 These forecasts also derive from ARK’s internal AI forecast as presented in ARK’s Big Ideas 2022 (see note 17).

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