Okay, let’s break down the Zoom Communications Inc. valuation based on the provided text. Here’s a summary of the key findings and calculations, along with some clarifying points:
1. Valuation Summary:
DCF-Based Valuation: $120 per share.
Current Share Price (as of Aug 5,2025): $72.06
Premium: 40% over the current share price ($120 / $72.06 – 1 = 0.666 or 66.6%)
Compared to analyst Target: 32% higher than the $90.96 analyst price target.
2.Methodology: Two-Stage DCF Model
Stage 1 (next 10 Years): Higher growth rates are projected, based on analyst estimates where available, and extrapolations from past free cash flow (FCF) data when analyst estimates are missing. Growth rates are expected to slow over time.
Stage 2 (Terminal Value): A “steady growth” rate is applied to calculate the terminal value, representing all cash flows beyond the initial 10-year period.
3.Key Financial projections (2026-2035):
The table shows projected Levered Free Cash Flows (FCF) in billions of US dollars, along with the source of the growth rate estimate and the present value of each year’s FCF, discounted at 7.9%.
| Year | Levered FCF ($ Billions) | Growth Rate Estimate Source | Present Value ($, Millions) Discounted @ 7.9% |
|—|—|—|—|
| 2026 | $1.71 | Analyst x17 | $1.6k |
| 2027 | $1.81 | Analyst x15 | $1.6k |
| 2028 | $1.89 | Analyst x8 | $1.5k |
| 2029 | $1.83 | Analyst x4 | $1.4k |
| 2030 | $2.04 | Analyst x4 | $1.4k |
| 2031 | $2.10 | Is @ 3.14% | $1.3k |
| 2032 | $2.16 | Is @ 3.08% | $1.3k |
| 2033 | $2.23 | Is @ 3.04% | $1.2k |
| 2034 | $2.30 | Is @ 3.01% | $1.2k |
| 2035 | $2.37 | Is @ 2.99% | $1.1k |
Total Present Value of 10-Year Cash Flows: $13 billion.
4.Terminal Value Calculation:
Terminal Growth Rate (g): 2.9% (based on the 5-year average of the 10-year government bond yield).
Discount Rate (r): 7.9%
FCF in 2035: $2.37 billion
Terminal Value (TV): $2.37b (1 + 0.029) / (0.079 – 0.029) = $49 billion
Present Value of Terminal Value (PVTV): $23 billion
*5.Total
