Zoom (ZM) stock forecast: Bargain opportunity or slippery slope?.4 Red Flags for Zoom Video Communications’ Future | The Motley Fool
May 28, · Zoom Video and Five9 in July announced a deal to merge. The all-stock deal was originally valued at $ billion. The all-stock deal was originally valued at $ billion. But the companies. Jul 01, · What happened Shares of Zoom Video Communications (NASDAQ: up from an earlier forecast of $ to $ *Stock Advisor returns as of June 7, Jun 05, · Zoom Video Communications just reported another quarter of incredible user growth. The company said it ended April with about , customers with 10 or more employees, an 87% increase from.
– ZM Stock | News | ZOOM VIDEO COMMUNICATIONS Stock Price Today | Analyst Opinions | Markets Insider
In my April initiation article for Zoom, I had noted that “increasing revenue from new products like Zoom Phone” is a key growth driver for the company. The new Zoom Phone Appliances, which the company refers to as a “new device category” for the Zoom Phone at its recent earnings call, is expected to further boost the sales of the Zoom Phone in the near future.
Source: Zoom’s June 9, Press Release. I evaluate Zoom’s recent 1Q FY financial performance and its growth prospects for calendar year and fiscal year February 1, to January 31, in the subsequent section. Zoom’s financial performance in the first quarter of fiscal was excellent on a YoY comparison and exceeded market expectations. At the company’s 1Q FY results briefing on June 1, , Zoom Video Communications highlighted that “revenue upside in the quarter carried through to the bottom line “, which implied that operating leverage was the key driver of ZM’s significant improvement in profitability in the recent quarter.
Apart from headline financial numbers, there are two key metrics to watch for Zoom. One key metric is the revenue contribution from Zoom’s clients with less than 10 staff.
In other words, this client segment drove Zoom’s growth in 1Q FY , but that might not be sustainable. In my initiation article published in April , I mentioned that I “expect Zoom’s churn rate for its customer cohort with less than 10 staff to be significantly higher than its customer cohort with more than 10 employees” going forward. This is aligned with the company management’s comments at the recent 1Q FY earnings call, where Zoom stressed that churn for the specific customer segment with less than 10 employees could be “more volatile as economies continue to reopen” because most of them are on “monthly plans” as opposed to yearly subscriptions.
Another key metric is Zoom Phone sales. On a cumulative basis, Zoom Phone sales have increased from approximately one million seats as of end calendar year to around 1. With expectations that more people could be returning to offices in time to come as and when the pandemic is contained, the increased sales for the Zoom Phone could help to offset the reduced demand for Zoom Meetings.
Also, as highlighted in the preceding section of this article, the introduction of new Zoom Phone Appliances with improved functionality catering to office needs like the interactive whiteboarding feature could help to drive the growth in Zoom Phone sales in the future.
In summary, a higher-than-expected churn rate for Zoom’s customer segment with less than 10 staff is a key downside risk, while Zoom Phone sales could surprise on the upside and boost the company’s top line.
Looking ahead, there is little doubt that Zoom’s revenue and earnings will be higher in calendar year or fiscal year , but it is the future pace of growth that matters.
The forward-looking numbers for the full-year are realistic, taking into account the strong 1Q FY results and the expected slow-down in subsequent quarters as WFH Work-From-Home tailwinds ease. Zoom’s slower pace of growth in the next two years is not surprising. The churn for ZM’s client segment with fewer than 10 staff will likely increase going forward and become a drag on the company’s overall sales growth.
At the same time, it is reasonable to assume that Zoom still derives most of its revenue from its core Zoom Meetings product, and it will take some time for Zoom Phone to be a significant contributor to the company’s top line. In other words, Zoom’s revenue and net profit will go up in calendar year , but ZM’s stock price might not go up for the rest of the year as investors gradually price in lower growth expectations for the stock.
Despite this, Zoom’s forward Enterprise Value-to-Revenue valuations are the second highest in the peer group. As such, I don’t view Zoom’s valuations as sufficiently attractive to justify a Buy rating. Sign up here to get started today! However, investors might be wondering if the stock can still generate multibagger gains this year as the pandemic ends. Let’s take a fresh look at Zoom’s strengths, its growth rates, and its valuations to see if its high-flying stock could at least double again this year.
Zoom attracted millions of users throughout the pandemic because it was easier to use than many other video conferencing platforms. Its free tier, which provided group calls for up to 40 minutes, roped in new users and nudged them toward paid tiers, which extended the time limit and added premium features like cloud-based recording, transcripts, and single sign-ons.
Zoom had already generated impressive returns prior to the pandemic thanks to its growth among enterprise and education users. Zoom’s revenue and earnings growth accelerated significantly throughout the first three quarters of the year:.
During the peak of the pandemic last April, Zoom claimed its meetings were hosting million active participants per day. That figure likely rose throughout the second and third quarters. Zoom’s growth among large enterprise customers also accelerated.
Those growth rates are impressive, but Zoom didn’t provide any clear guidance for fiscal Instead, we should review the facts. These big tech rivals can all afford to undercut Zoom’s prices. However, Zoom could still attract users and companies that don’t want to tether themselves to those big tech ecosystems.
Its strong brand recognition, which has made it synonymous with video calls, could also prevent users from trying out competing services. Second, the influx of free users, especially among schools, has been throttling Zoom’s gross margins. However, its operating margins are improving as its revenue growth outpaces its operating expenses:. But during last quarter’s conference call , Zoom CFO Kelly Steckelberg warned that the company’s operating margins would continue to contract sequentially as it expands its sales teams and invests in new products like its voice-only Zoom Phone platform and its OnZoom marketplace for online events.
It’s also unclear if Zoom can reduce its dependence on free users to boost its gross margins again. Steckelberg expects Zoom’s gross margins to remain “consistent” with its third quarter throughout fiscal before expanding again — but that could be challenging if its revenue growth decelerates after the pandemic ends.
I recently warned that Zoom’s valuations were too hot to handle , and I stand by that assessment. That might seem like a reasonable valuation, especially compared to other high-growth tech stocks, but it’s a high price to pay for a company that faces uncertain post-pandemic returns. Pandemic-related fears could still drive this stock higher this year, but I believe fundamental gravity and concerns about its long-term growth will prevent its stock from doubling or replicating its jaw-dropping gains from Cost basis and return based on previous market day close.
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Zoom video stock forecast 2021 – none:.Is Zoom Video Communications Stock a Buy?
May 23, · First quarter total revenue of $1, million, up 12% year over year · First quarter GAAP operating margin of % and non-GAAP. Zoom Video Communications’ share price has increased by +7% and +51% year-to-date and the last 12 months, respectively. However, Zoom’s stock.