For many investors, Zoom Video Communications (ZM -1.90%) is a pandemic trade that has long since lost its allure. But Cathie Wood's Ark Invest published a valuation model in 2022 estimating Zoom would reach $1,500 per share by 2026. From the current share price of $67, that forecast implies 2,138% upside in little more than two years.

Having said that, Wood and her team may have lost confidence in Zoom. The stock used to be one of Ark's five largest positions, but it no longer ranks in the top 100. That's not surprising given the circumstances. Zoom shares have gradually declined since the pandemic, such that the stock currently trades 88% below its record high.

However, Ark's valuation model for Zoom is still available to the public, so here's what investors should know about the beleaguered communications software company.

Zoom is a leader in unified communications software

Zoom is best known for its videoconferencing software, Zoom Meetings. That product was so popular during the pandemic that Zoom achieved a $2 billion revenue run rate faster than any software vendor in history. Zoom Meetings is the still leading videoconferencing software with a market share of roughly 55%, according to Statista.

But Zoom packs a whole lot more functionality into its unified communications platform. It also supports telephony (Zoom Phone), customer service (Zoom Contact Center), team chat, virtual events, and webinars. Additionally, Zoom has developed a number of artificial intelligence (AI) tools that improve productivity and automate workflows across its platform, as detailed below:

  • Zoom Revenue Accelerator analyzes interactions in Zoom Meetings and Zoom Phone to surface insights that boost sales team productivity.
  • Zoom Virtual Agent is an intelligent chatbot that automates customer service workflows in Zoom Contact Center.
  • Zoom AI Companion is a digital assistant that integrates with other Zoom products to draft messages, summarize conversations, and surface insights.

Importantly, consultancy Gartner has recognized Zoom as a leader in unified communications as a service for four straight years. The most recent report listed its key strengths as contact center functionality and deeply integrated artificial intelligence tools. Gartner also noted that Zoom has done well upselling videoconferencing customers with adjacent products.

Zoom values its addressable market at $125 billion market by 2026. The company attributes about 85% of that total to its videoconferencing, telephony, and contact center products, while artificial intelligence tools comprise the remaining 15%.

Low-single-digit growth has become the status quo for Zoom

Zoom reported better-than-expected financial results in the second quarter of fiscal 2025 (ended July 31), but the numbers themselves were disappointing. Its enterprise customer count declined 12% to 191,600, and the average enterprise customer spent 2% less over the past year. In turn, revenue rose just 2% to $1.1 billion, and non-GAAP (adjusted) net income increased just 4% to $1.39 per diluted share.

Management provided a some encouraging information. The number of Zoom Contact Center customers more than doubled in the past year, and 1.2 million customer accounts have enabled Zoom AI Companion. That means Zoom is successfully driving adoption of products beyond its core videoconferencing solution. Additionally, remaining performance obligation increased 8%, which hints at a possible (albeit slight) acceleration in sales in the coming quarters.

Zoom stock trades at a modest valuation

Wall Street expects Zoom's earnings to increase at 8.4% annually over the next three years, which represents a slight acceleration from the low-single-digit status quo. The consensus earnings estimate makes the current valuation of 24.1 times earnings look a bit pricey, but not outrageously so. Those figures give a PEG ratio of 2.9, which is actually a discount to the three-year average of 5.5.

To be frank, Zoom has zero chance of achieving the quadruple-digit returns implied by Ark's valuation model, at least not by 2026. However, Zoom has a median 12-month price target of $74 per share, implying 10% upside from its current share price of $67. Investors interested in owning this possible turnaround stock should consider buying a small position today.