Following a strong Q1 report which beat on the top and bottom-line, shares were mostly unchanged. Zoom (ZM  ) has been one of the companies that went from being pretty obscure prior to the pandemic to becoming as ubiquitous as Facebook (FB  ) or Google (GOOGL  ). This resulted in the company's stock gaining nearly 500% between the lows in March and its high in October. Since then, shares are down 42%.

The company's video platform enabled companies to keep operating and schools to go online. It quickly became the most popular service due to its ease of use and speed. However, the company also has attained an incredible valuation, and there are many skeptical of its ability to grow into this valuation especially in a post-pandemic world.

Inside the Numbers

In Q1, Zoom reported $1.32 in earnings per share which topped expectations of $0.99 per share. Revenue also beat at $956 million vs $910 million. This is a 191% increase over Q1 in 2020. While this is impressive it's also a marked deceleration from its previous quarter's revenue growth of 369%.

CEO Eric Yuan said, "We kicked off the fiscal year with a very strong first quarter, posting 191% total year-over-year revenue growth combined with strong profitability and cash flow. Our steadfast commitment to empowering customers to work and learn from anywhere with our expansive, innovative, and frictionless video communications platform continued to drive our results."

Zoom's basic product is free for anybody to use for up to 30 minutes. The company derives the bulk of its revenue from companies that pay a subscription to Zoom for longer meetings and more features. The company sees Zoom's future as being a platform, where other developers will build apps on top of it.

In Q2, Zoom expects revenue between $985 million and $990 million which is slightly above expectations of $941 million. Earnings per share also forecast slightly above consensus expectations at $1.15 vs $0.94.

Stock Price Outlook

Despite Zoom's more than 40% decline from its highs. The company does face some major headwinds in the near term. First of all, it remains extremely overvalued with a $100 billion valuation. Second, it's already seeing declining revenue growth which is likely to get worse as offices reopen, and there is less remote work. Third, there's little reason to believe that the rotation from growth to value is over especially as underlying economic growth remains quite strong. Finally, the company's long-term plan of increasing engagement and revenue per user through apps on the platform has no guarantee of success in terms of attracting developers and getting users to pay for these features.

Therefore, investors should be patient and wait for lower prices for Zoom.