ZM Stock Gains Spotlight After Spruce Point Issues Rare ‘Buy’ Call – Recommends Turnaround Plan For ‘Pandemic Darling’

• Spruce Point believes the market is overlooking key strengths, including Zoom’s $1.2 billion stake in AI firm Anthropic.
• The firm recommended a $4 billion share buyback plan.
• Spruce Point sees the sale of the company as the ‘ultimate desired outcome.’

Zoom Video Communications (ZM) was in the spotlight on Friday after Spruce Point Capital Management issued a rare “strong buy” call, saying the stock is materially undervalued and laying out a nine-point roadmap aimed to unlock shareholder value.

Spruce Point believes the market is overlooking key strengths, including Zoom’s leadership in video communications and its estimated $1.2 billion stake in AI firm Anthropic.

In a notable departure from its typically bearish stance, Spruce Point Capital Management said its forensic review found little to support the prevailing negative sentiment around Zoom Communications, which has been under pressure from slowing growth and broader weakness across the software-as-a-service (SaaS) sector.

ZM shares were trading 0.2% higher at the time of writing.

Spruce Point’s Nine-Point Recommendation

At the top of the list is capital allocation, with a proposed $4 billion buyback and dividend to better utilize Zoom’s strong cash position. The firm also sees room to cut costs and improve efficiency, particularly by reducing headcount and reallocating spending to boost margins and growth.

Operational fixes include restructuring the underperforming international business and improving marketing to better position Zoom as an enterprise platform rather than just a video app. Spruce Point also warned against aggressive mergers and acquisitions, citing past missteps.

On governance, it suggested consolidating insider selling and simplifying the dual-class share structure to improve investor confidence. It also flagged potential upside catalysts such as lobbying for S&P 500 inclusion and attracting a strategic investor.

Finally, the firm said a sale of the company remains a possible endgame if management fails to unlock value, noting strong interest from private equity could support a premium valuation.

Overall, Spruce Point sees a clear path for a stock re-rating, especially if management executes on these changes, positioning Zoom as a turnaround story rather than a fading “COVID-19 pandemic darling.”

How Did Retail Traders React?

Retail sentiment on Stockwits remained in the ‘bearish’ territory over the past 24 hours, but chatter on the platform grew by 25%.

One user said they were skeptical in the long run. The stock has closed in the red in the past 2 sessions.

The stock has climbed around 3% higher so far this year.

Read also: LLY Stock Clings To 200-DMA As Sell-off Deepens: Retail Eyes ‘Positioning' Play Ahead Of Q1 Earnings Next Week

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