Zoom's stock has retraced to $95, a significant level that previously acted as resistance from March to July before the stock broke out in late July. This level is now serving as support, which could indicate a potential bounce back.
The company has demonstrated strong profitability, with a non-GAAP net margin of approximately 36%, and is trading at a forward earnings multiple of 15.7, below the software sector average of 17. Additionally, Zoom's enterprise revenue has grown by 7.8% to $787.5 million, making up 61.6% of total revenue, with a net dollar expansion rate of 99%.
The company has also been actively repurchasing shares, having bought back 3.7 million shares last quarter, with $1.3 billion remaining in its buyback authorization. Given these factors, a bullish options strategy, specifically a bull put spread, is being recommended to capitalize on the potential for a bounce off the $95 support level.
This strategy involves selling an October 2026 $95 put and buying an October 2026 $90 put, allowing for a maximum reward of $220 if the stock remains above $95 at expiration, with a maximum risk of $280 if it falls below $90. Overall, the current valuation does not reflect the company's strong fundamentals, presenting an opportunity for investors