Spruce Point Capital is LONG Zoom Communications, Inc. (Nasdaq: ZM) — a rare strong-buy recommendation. After a forensic review, Spruce Point sees material upside potential, viewing Zoom as a market leader trading well below intrinsic value, including an estimated $1.2B stake in AI leader Anthropic. The report outlines nine core recommendations to accelerate shareholder value creation: improve capital allocation ($4B Dutch auction tender + $1/share dividend), reduce operating expenses, restructure the underperforming international business, improve marketing, avoid M&A mistakes, and consolidate insider selling. Spruce Point estimates 83% share upside from EBITDA multiple re-rating (9.5x to 19x) and $172M of incremental EBITDA.
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A Rare Long Thesis
Over 17 years, Spruce Point has typically published strong sell opinions. However, this report presents the opposite viewpoint — a strong buy recommendation on Zoom Communications, Inc. (Nasdaq: ZM).
Spruce Point believes Zoom is a market leader trading well below intrinsic value with a clear roadmap for shareholder value creation.
The Undervaluation Thesis
Zoom is the leader in video communications and was a COVID-19 pandemic darling. However:
- A growth slowdown
- Persistent skepticism regarding its market opportunity and competitive position
- The current 'SaaS-pocalypse'
...have, Spruce Point believes unfairly, driven Zoom's valuation to egregiously low levels, particularly considering the Company's estimated $1.2 billion stake in AI leader Anthropic.
Nine Core Recommendations
1. Improve Capital Allocation
- Zoom has $7.8 billion of net cash and should generate ~$2 billion/year in FCF
- Buybacks pale vs. lower-growth, highly cash-generative peers (Salesforce, Wix)
- Recommends a $4 billion modified Dutch auction tender (10% accretive to non-GAAP EPS)
- Recommends initiating a $1/share dividend (1.1% yield) — dividend initiations typically result in 3-5% one-day returns
2. Reallocate and Reduce Operating Expenses
- Zoom underspends on R&D relative to S&M
- Revenue per average employee has declined 14% since 2020 (peers grew 53%; large-cap SaaS medians grew 44%)
- Despite 15% headcount reduction in early 2023, Zoom failed to rationalize to the same degree as peers
- Sees 130bps and 300bps revenue upside over the next two years
- Could increase two-year EBITDA CAGR from 4.0% to 13.3%
3. Restructure International Business
- International revenue CAGR trails US: 1% vs 5% (3-year) and 11% vs 14% (5-year)
- International revenue mix just 28% in FY2026, trailing SaaS peers
- 'Order-takers' who cleaned up during the pandemic are struggling to actually 'sell'
4. Improve Marketing
- Zoom has exceptional name recognition but is not adequately leveraging brand equity
- Brand remains inextricably linked to video conferencing — unable to shake 'consumer-only' perception
5. Avoid M&A Mistakes
- Failed Five9 acquisition ($15B all-stock) is a cautionary tale
- Massive cash war chest + AI fervor risk overly aggressive M&A in inflated private valuations
6. Consolidate Insider Selling
- Insiders increasingly seeking liquidity — constant flow of shares pressuring the stock
- Recommends marketed secondary or structured sale to financial partner
The Upside Math
Based on Spruce Point's analysis:
- EV/EBITDA multiple re-rating from 9.5x to 19x
- $172 million of incremental EBITDA
- Could drive 83% share upside
- Two-year EBITDA CAGR improvement from 4.0% to 13.3%
subsequent events
- 2020-2026Zoom's revenue per average employee declines 14% while peers grow 53%
“Zoom has failed to rationalize its headcount post-COVID-19 to the same degree as other more aggressive peers”
- 2026-04-24Spruce Point publishes rare long/strong-buy recommendation on Zoom
“We see material upside potential in the Company's shares”
Source — https://www.sprucepointcap.com/research/zoom-communications-inc
Not investment advice. This dossier summarizes a third-party short report. The Forensic Ledger did not produce the underlying research and does not endorse its conclusions. Nothing here is a recommendation to buy, sell, or hold any security. Always consult the original source and a licensed professional. See our full disclaimer and source-citation policy.