Key Points
- Semler Scientific’s Chair, Eric Semler, urges Zoom Communications to invest its $7.7 billion reserves into Bitcoin.
- He believes this strategy could boost growth and shareholder value, citing his firm’s success with a similar approach.
Eric Semler, the head of Semler Scientific, has suggested that Zoom Communications should consider investing its substantial cash reserves of $7.7 billion into Bitcoin.
Semler believes this move could significantly enhance growth and increase shareholder value.
Zoom’s Financial Position
In a post, Semler mentioned his firm’s success with a similar investment strategy. Semler Scientific accumulated 3,192 BTC, worth approximately $305 million, which led to a doubling of its stock price over the past year.
However, Zoom’s market performance has been less than stellar. Semler even referred to Zoom as a “Zombie Zone” company due to its underwhelming market performance. Over the past three years, Zoom’s shares have declined by about 40%, underperforming the S&P 500 by roughly 73%.
Furthermore, in the last five years, Zoom’s performance has trailed the S&P by approximately 84%. Despite a forward earnings multiple of 15x and a forward EBITDA multiple of 9x, Zoom’s valuation remains low due to stagnant growth.
Bitcoin Treasury Strategy
Zoom has $7.7 billion in cash, nearly a third of its $25 billion market cap, with no apparent plan for deployment. The company also boasts strong profitability, with ~40% EBITDA margins and $458 million in cash generated last quarter.
However, its projected revenue growth remains weak, with estimates in the low single digits.
Semler suggested that adopting a Bitcoin treasury strategy could transform Zoom into one of the largest corporate Bitcoin (BTC) holders. This could be achieved by leveraging its $2 billion in annualized free cash flow and access to low-cost debt.
Semler highlighted that Zoom’s founder and CEO, Eric Yuan, who possesses super-voting shares, has the power to implement this strategy. However, Yuan has not publicly expressed any views on Bitcoin.