WeWork ( NYSE:WE ) led global headlines when it achieved it’s long-awaited public debut via SPAC on Oct. 21. But if you’re interested in investing in the future of work, there may be better uses of your investment capital. In the following segment of Backstage Pass , recorded on Oct. 22 , Fool.com contributors Jason Hall, Toby Bordelon, and Rachel Warren discuss three such stocks, as well as a few other names investors know well. 10 stocks we like better than Zoom Video Communications
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Jason Hall : Alright, well, we spent a lot of time talking about a business that we don’t even like. Let’s do a little transition here. We think about what WeWork is. There is this interesting idea, particularly work-from-home, the hybrid movement, all that sort of thing.
More people wanting to do gig work. That having this office space that you can lease, it’s outside of your own property, is an interesting opportunity. I think it could be a good business if it’s structured well. But I don’t think this is the right one.
Guys, thinking broadly again, not just about real estate but thinking about the present and the future of how people will work. What’s a better investment? Rachel, I’m going to ask you to go first. We give Toby’s dulcet tones a little break.
Rachel Warren: [laughs] Sounds like a plan. Yeah, well, I thought about this and the first company that came to mind for me was Zoom ( NASDAQ:ZM ). Obviously this is a company that received so much attention during those early days of the pandemic with everyone going from being out and about to working at home, studying at home, socializing at home.
But I think it’s a company that can and does provide still a lot of value in this post-pandemic world where more and more companies are going hybrid, but there’s still a good portion of the workforce that’s trying to find their way in this ever-changing dynamic. I think the thing I would point to with Zoom because there’s been a lot of questions about, oh, is this a company that can still really provide a lot of value as an investment in over the long term?
I just would point even to their most recent quarterly report, which was for the second quarter of their fiscal year 2022. During that three-month period, they grew their revenue 54% from the same period last year. So, a year on from basically what was the height of the pandemic, revenue was up 54% from that period.
I think another number that was really interesting was their customer base contributing more than a $100,000 in trailing 12-month’s revenue was up a 131% year-over-year. Huge influx of customers and revenue, even a year on compared to this period where everything was in those most dire straits.
Another thing is there was a study by Upwork , the popular freelancing platform and their study found that 22% of the American workforce will be remote by 2025. You think of a platform like Zoom, I think it’s going to be integral to that kind of a workspace. Zoom is my pick.
Jason Hall: I’m going to throw up a chart here about Zoom because I tend to get so enamored with this business and thinking about the economics. This is what the stock price has done over the past year, just this steady, steady, steady decline negative, and its revenue growth has slowed.
The company told us. We’re going to have to moderate our revenue growth. But you think about the economics of this business. This is operating cash flow, $1.8 billion, and then free cash flow of $1.7 billion roughly.
This is a company that generates about 45% free cash flow margins. That is incredible. That is incredible. Even if its core Zoom business slows its growth, there are so many levers the company can grow.
This massive growing cash pile it’s adding, I don’t know, last quarter, I think it added $400 million in cash to its bottom line. […]
source Investing in the Future of Remote Work: 3 Stocks That Are Better Than WeWork