Zoom to buy Five9 for $14.7B. Should you buy ZM stock?

Summary 

  • Zoom Video Communications Inc. (NASDAQ:ZM, ZM:US) announced on Sunday, July 18, that it is acquiring Five9 Inc. (NASDAQ:FIVN).
  • Zoom is reportedly trying to diversify its business as offices are expected to restore normalcy amid increased vaccinations.
  • Zoom is said to be buying the software company in an all-stock deal.

Zoom Video Communications Inc. (NASDAQ:ZM, ZM:US) announced on Sunday, July 18, that it is acquiring Five9 Inc. (NASDAQ:FIVN), a provider of cloud software for call centres.

Ever since the pandemic began in December 2019, Zoom's popularity has boomed worldwide. The video messaging firm is reportedly trying to diversify its business as offices are expected to restore normalcy amid increased vaccinations.

Zoom is said to be buying the software company in an all-stock deal worth US$ 14.7 billion. This is expected to be the first billion-dollar acquisition by the video communications company.

 

What is in store for Five9 (NASDAQ:FIVN) shareholders?


On Friday, July 16, Five9 shares climbed 0.6 per cent to close at US$ 177.6 per share. Its market cap was US$ 11.9 billion.

As per the deal, investors who hold Five9 stocks are expected to receive 0.5522 per share, which puts their value at US$ 200.28 apiece. This price stands 13 per cent above its last closing price.

The deal will reportedly close before June 2022, after it receives the approval of Five9 shareholders and regulatory authorities.

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Can Zoom (NASDAQ:ZM) benefit from Five9 acquisition?


As more people around the world get vaccinated, the hope that businesses and offices will be able to resume normal work operations increases. As a result, Zoom, which largely focused on simplifying remote working experiences, might face a slowdown.

With this scenario in mind, Zoom could benefit from Five9 acquisition as it has different operations. Notably, the software company has seen continuous growth recently. 

Zoom CEO Eric Yuan reportedly said that the company is exploring new ways to diversify business operations and enhance its platform. Five9 deal seems to be a part of this strategy.

In 2020, Five9 recorded revenues of US$ 434.9 million, representing an increase of 33 per cent year-over-year (YoY). In the same period, its adjusted EBITDA expanded to US$ 85.7 million from US$ 60.8 million in 2019.

In the first quarter of 2021, Five9 achieved record revenues of US$ 137.9 million, up 45 per cent YoY. Its GAAP operating cash flows for the latest quarter increased to US$ 13.8 million.

On the other hand, ZM stock expanded by 45 per cent in the last twelve months. It also climbed by seven per cent on a year-to-date (YTD) basis.

At market close on July 16, Zoom Communication stock was priced at US$ 361.97 apiece, which was 38.5 per cent down from its 52-week high of US$ 588.84 (October 19, 2020).

Investors interested in exploring Zoom stock could use this price as an entry point as its value is likely to rise in future.

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