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The remote work world brought on overnight by the pandemic thrust Zoom Video Communications, Inc. (ZM - Free Report) into the lives of everyday users, businesses, and Wall Street. The unprecedented circumstances helped ZM’s revenue soar 326% last year.
The standout growth stock then began to tumble in late October as investors dumped Zoom in anticipation of the economic reopening. But the cloud-based video communication platform has diversified its offerings and is poised to thrive in the hybrid work environment. And Wall Street seems to agree Zoom has legs beyond the pandemic, with the stock up around 35% since May 10.
New Work World
The family Zoom calls might be gone for good for many and schools appear ready to restart in person this fall, amid the largely successful vaccine rollout in the U.S. Yet the end of consumer-level Zooming doesn’t really matter since Zoom makes money from its paying business clients that have proliferated during the past 15 months.
For instance, Zoom closed its fiscal 2021 (period ended on Jan. 31) with around 467K customers that had more than 10 employees, up 470%. Plus, its customers contributing more than $100K in TTM revenue surged 156% to 1,644.
Clearly that is the past and Zoom naysayers are focused on the return to a more normal working world as big companies throughout the country slowly call their employees back to the office. Despite the eventual return to the office, hybrid environments where people come in two to three days a week could possibly become the new normal. Many people in professional services jobs, with more leverage and the ability to more easily change jobs, found remote work life beneficial.
The massive climb in corporate earnings, especially in the tech world, and the current U.S. GPD growth have helped showcase that the work-from-anywhere-world can be accompanied by economic expansion. Zoom also enables businesses to cut back on travel, which was a pitch it was making well before it went public. And the pandemic might have changed the corporate travel environment for good, with the help of Zoom and others.
Image Source: Zacks Investment Research
Countless jobs are done nearly all on computers, driven by business software, SaaS, cloud computing, and more. Companies of all shapes and sizes from every sector now rely heavily on various technologies and there is no going back.
Zoom has expanded its portfolio from a videoconferencing app to a more complete communication platform that includes Zoom Phone. Cloud-based phone solutions are quickly becoming popular as businesses look for modern telecom solutions. The goal is to have a unified place for calls, video, meetings, chat, and more. Meanwhile, Zoom Rooms are its updated take on the conference room designed for the hybrid world.
The firm also announced on May 19 its new Zoom Events platform that “combines the reliability and scalability of Zoom Meetings, Chat, and Video Webinars in one comprehensive solution for event organizers, with the ability to produce ticketed, live events for internal or external audiences of any size.” The changing environment is a big reason why Salesforce (CRM - Free Report) plans to buy work-focused communication platform Slack for roughly $28 billion, which is the second-largest deal in software history.
Recent Results & Growth Outlook
Zoom topped our first quarter FY22 (period ended on April 30) estimates on June 1, with revenue up 191% to $956.2 million and its adjusted earnings up from $0.20 to $1.32 a share to crush our EPS estimate by 36%. Meanwhile, its customers contributing more than $100K in TTM revenue jumped 160% from the year-ago period and 22% from Q4 to 1,999.
ZM closed the quarter with 497K customers with more than 10 employees, up nearly 90% from the prior-year quarter. Management also said on its earnings call that its cloud-computing-based phone service reached 1.5 million seats, up from the 1 million the company reported in January.
Zoom raised its full-year guidance last quarter and Zacks estimates now call for its fiscal 2022 revenue to jump another 50% from $2.65 billion to $3.99 billion. Clearly, this marks a slowdown from the impossible to recreate year of 326% expansion. Nonetheless, the ability to grow by another 50% or $1.34 billion is highly impressive and shows the stability of its subscription model and the continued demand from business clients.
The firm’s FY23 sales are then projected to climb another 21% higher to reach $4.80 billion—it pulled in $623 million in all of FY20. At the bottom end, its adjusted FY22 earnings are projected to surge another 40% to $4.66 a share after it skyrocketed by around 850% last year.
The nearby chart also showcases that its FY22 and FY23 consensus EPS estimates popped 27% and 17%, respectively following its earnings release. The recent climb is part of a continued upward revisions trend during the past year.
Image Source: Zacks Investment Research
Other Fundamentals
Zoom went public in April 2019 and it has climbed 350% in the last two years. That said, the stock has fallen back to Earth since its huge early pandemic run, up 55% in the trailing 12 months vs. the Zacks Tech sector’s 52%. Luckily, the stock has mounted a comeback since it fell near oversold RSI (30) levels in early May and has benefitted from the resurgence of tech stocks that has pushed the Nasdaq to new records.
ZM has climbed 35% since May 10 and it popped another 4% on Monday to close regular hours $388.86 a share. The recent run has pushed it right near overbought (70) RSI levels. This means there could be a near-term pullback.
Despite the climb, Zoom trades 30% below its October records and at a 60% discount to its own year-long highs at 25.4X forward 12-month sales—with it trading not too far above its all-time lows in terms of forward sales. On top of that, Zoom just broke above its 200-day moving average, which could create more momentum.
Image Source: Zacks Investment Research
Bottom Line
Zoom’s positive earnings revisions help it land a Zacks Rank #1 (Strong Buy) right now, alongside its “A” grades for Growth and Momentum in our Style Scores system. And seven of the 18 brokerage recommendations Zacks has for the stock are “Strong Buys,” with none below a “Hold.”
Furthermore, ZM boasts a solid balance and it bolstered its cash position through a secondary stock offering in January. Zoom wanted to maintain what its CFO called “optimal flexibility for our balance sheet.” ZM ended the first quarter with $4.69 billion in cash and equivalents and no debt. This should help the company continue to diversify its business and pursue new strategic growth areas down the road.
It is worth pointing out that some have suggested the pop to start the week is due to concerns about the Delta variant of the coronavirus.
Bitcoin, Like the Internet Itself, Could Change Everything
Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities.
Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.
Bull of the Day: Zoom Video (ZM)
The remote work world brought on overnight by the pandemic thrust Zoom Video Communications, Inc. (ZM - Free Report) into the lives of everyday users, businesses, and Wall Street. The unprecedented circumstances helped ZM’s revenue soar 326% last year.
The standout growth stock then began to tumble in late October as investors dumped Zoom in anticipation of the economic reopening. But the cloud-based video communication platform has diversified its offerings and is poised to thrive in the hybrid work environment. And Wall Street seems to agree Zoom has legs beyond the pandemic, with the stock up around 35% since May 10.
New Work World
The family Zoom calls might be gone for good for many and schools appear ready to restart in person this fall, amid the largely successful vaccine rollout in the U.S. Yet the end of consumer-level Zooming doesn’t really matter since Zoom makes money from its paying business clients that have proliferated during the past 15 months.
For instance, Zoom closed its fiscal 2021 (period ended on Jan. 31) with around 467K customers that had more than 10 employees, up 470%. Plus, its customers contributing more than $100K in TTM revenue surged 156% to 1,644.
Clearly that is the past and Zoom naysayers are focused on the return to a more normal working world as big companies throughout the country slowly call their employees back to the office. Despite the eventual return to the office, hybrid environments where people come in two to three days a week could possibly become the new normal. Many people in professional services jobs, with more leverage and the ability to more easily change jobs, found remote work life beneficial.
The massive climb in corporate earnings, especially in the tech world, and the current U.S. GPD growth have helped showcase that the work-from-anywhere-world can be accompanied by economic expansion. Zoom also enables businesses to cut back on travel, which was a pitch it was making well before it went public. And the pandemic might have changed the corporate travel environment for good, with the help of Zoom and others.
Countless jobs are done nearly all on computers, driven by business software, SaaS, cloud computing, and more. Companies of all shapes and sizes from every sector now rely heavily on various technologies and there is no going back.
Zoom has expanded its portfolio from a videoconferencing app to a more complete communication platform that includes Zoom Phone. Cloud-based phone solutions are quickly becoming popular as businesses look for modern telecom solutions. The goal is to have a unified place for calls, video, meetings, chat, and more. Meanwhile, Zoom Rooms are its updated take on the conference room designed for the hybrid world.
The firm also announced on May 19 its new Zoom Events platform that “combines the reliability and scalability of Zoom Meetings, Chat, and Video Webinars in one comprehensive solution for event organizers, with the ability to produce ticketed, live events for internal or external audiences of any size.” The changing environment is a big reason why Salesforce (CRM - Free Report) plans to buy work-focused communication platform Slack for roughly $28 billion, which is the second-largest deal in software history.
Recent Results & Growth Outlook
Zoom topped our first quarter FY22 (period ended on April 30) estimates on June 1, with revenue up 191% to $956.2 million and its adjusted earnings up from $0.20 to $1.32 a share to crush our EPS estimate by 36%. Meanwhile, its customers contributing more than $100K in TTM revenue jumped 160% from the year-ago period and 22% from Q4 to 1,999.
ZM closed the quarter with 497K customers with more than 10 employees, up nearly 90% from the prior-year quarter. Management also said on its earnings call that its cloud-computing-based phone service reached 1.5 million seats, up from the 1 million the company reported in January.
Zoom raised its full-year guidance last quarter and Zacks estimates now call for its fiscal 2022 revenue to jump another 50% from $2.65 billion to $3.99 billion. Clearly, this marks a slowdown from the impossible to recreate year of 326% expansion. Nonetheless, the ability to grow by another 50% or $1.34 billion is highly impressive and shows the stability of its subscription model and the continued demand from business clients.
The firm’s FY23 sales are then projected to climb another 21% higher to reach $4.80 billion—it pulled in $623 million in all of FY20. At the bottom end, its adjusted FY22 earnings are projected to surge another 40% to $4.66 a share after it skyrocketed by around 850% last year.
The nearby chart also showcases that its FY22 and FY23 consensus EPS estimates popped 27% and 17%, respectively following its earnings release. The recent climb is part of a continued upward revisions trend during the past year.
Other Fundamentals
Zoom went public in April 2019 and it has climbed 350% in the last two years. That said, the stock has fallen back to Earth since its huge early pandemic run, up 55% in the trailing 12 months vs. the Zacks Tech sector’s 52%. Luckily, the stock has mounted a comeback since it fell near oversold RSI (30) levels in early May and has benefitted from the resurgence of tech stocks that has pushed the Nasdaq to new records.
ZM has climbed 35% since May 10 and it popped another 4% on Monday to close regular hours $388.86 a share. The recent run has pushed it right near overbought (70) RSI levels. This means there could be a near-term pullback.
Despite the climb, Zoom trades 30% below its October records and at a 60% discount to its own year-long highs at 25.4X forward 12-month sales—with it trading not too far above its all-time lows in terms of forward sales. On top of that, Zoom just broke above its 200-day moving average, which could create more momentum.
Bottom Line
Zoom’s positive earnings revisions help it land a Zacks Rank #1 (Strong Buy) right now, alongside its “A” grades for Growth and Momentum in our Style Scores system. And seven of the 18 brokerage recommendations Zacks has for the stock are “Strong Buys,” with none below a “Hold.”
Furthermore, ZM boasts a solid balance and it bolstered its cash position through a secondary stock offering in January. Zoom wanted to maintain what its CFO called “optimal flexibility for our balance sheet.” ZM ended the first quarter with $4.69 billion in cash and equivalents and no debt. This should help the company continue to diversify its business and pursue new strategic growth areas down the road.
It is worth pointing out that some have suggested the pop to start the week is due to concerns about the Delta variant of the coronavirus.
Bitcoin, Like the Internet Itself, Could Change Everything
Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities.
Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.
See 3 crypto-related stocks now >>