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Zoom Video (ZM) Continues Streak of Exceeding EPS Expectations
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Communications platform provider Zoom Video (ZM - Free Report) is a notable tech standout in a shortened week of trading as the Thanksgiving holiday approaches.
While this week’s earnings lineup doesn’t feature an abundance of headline names, Zoom is a stock to keep an eye on after posting better-than-expected Q3 results on Monday. Even better, Zoom continued an impressive streak of surpassing earnings expectations and offered favorable revenue guidance.
Zoom’s Q3 Results
Zoom reported Q3 EPS of $1.38 which topped Zacks estimates of $1.31 and rose 7% from $1.29 per share a year ago. CEO and Co-Founder Eric Yuan attributed Zoom's better-than-expected Q3 results to its AI offerings with sales of $1.17 billion rising 3% year over year and edging expectations of $1.16 billion.
More astonishing, is that Zoom has exceeded the Zacks EPS Consensus in every quarter since the company went public back in 2019. Notably, Zoom has posted an average EPS surprise of 14.29% in its last four quarterly reports.
Image Source: Zacks Investment Research
Zoom’s Favorable Guidance
Zoom’s revenue guidance for Q4 came in slightly ahead of expectations with the company highlighting that its Contact Center set a record with an over 20,000-seat deal in EMEA (Europe, Middle East, and Africa). Furthermore, Zoom stated its Workvivo platform for employee experiences secured the largest deal ever with a Fortune 10 company. Correlating with such, Zoom’s full-year revenue guidance for its current fiscal 2025 of $4.65-$4.66 billion came in above the current Zacks Consensus of $4.64 billion or 2% growth.
Image Source: Zacks Investment Research
ZM Stock Performance & Valuation
Year to date, Zoom’s stock is up a very respectable +19% although this has trailed the broader indexes and lagged the Zacks Internet-Software Market’s +33%. That said, it’s noteworthy that the Zacks Internet-Services Industry is in the top 14% out of 250 Zacks industries with Twilio (TWLO - Free Report) and Fortinet (FTNT - Free Report) being two notable standouts.
Image Source: Zacks Investment Research
Despite lagging behind its industry’s strong YTD performance, Zoom's stock is appealing in terms of valuation. To that point, ZM trades at a very reasonable 15.6X forward earnings multiple compared to the benchmark S&P 500’s 25.4X.
Plus, Zoom trades at a pleasant discount to its industry average of 32.6X forward earnings with Twilio and Fortinet at 28.6X and 44.2X respectively.
Image Source: Zacks Investment Research
Takeaway
Zoom Video’s stock sports a Zacks Rank #2 (Buy) following its favorable Q3 report and guidance. Earnings estimate revisions are likely to go up for Zoom in the coming weeks with the company’s attractive P/E valuation and consistency also supporting more upside.
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Zoom Video (ZM) Continues Streak of Exceeding EPS Expectations
Communications platform provider Zoom Video (ZM - Free Report) is a notable tech standout in a shortened week of trading as the Thanksgiving holiday approaches.
While this week’s earnings lineup doesn’t feature an abundance of headline names, Zoom is a stock to keep an eye on after posting better-than-expected Q3 results on Monday. Even better, Zoom continued an impressive streak of surpassing earnings expectations and offered favorable revenue guidance.
Zoom’s Q3 Results
Zoom reported Q3 EPS of $1.38 which topped Zacks estimates of $1.31 and rose 7% from $1.29 per share a year ago. CEO and Co-Founder Eric Yuan attributed Zoom's better-than-expected Q3 results to its AI offerings with sales of $1.17 billion rising 3% year over year and edging expectations of $1.16 billion.
More astonishing, is that Zoom has exceeded the Zacks EPS Consensus in every quarter since the company went public back in 2019. Notably, Zoom has posted an average EPS surprise of 14.29% in its last four quarterly reports.
Image Source: Zacks Investment Research
Zoom’s Favorable Guidance
Zoom’s revenue guidance for Q4 came in slightly ahead of expectations with the company highlighting that its Contact Center set a record with an over 20,000-seat deal in EMEA (Europe, Middle East, and Africa). Furthermore, Zoom stated its Workvivo platform for employee experiences secured the largest deal ever with a Fortune 10 company. Correlating with such, Zoom’s full-year revenue guidance for its current fiscal 2025 of $4.65-$4.66 billion came in above the current Zacks Consensus of $4.64 billion or 2% growth.
Image Source: Zacks Investment Research
ZM Stock Performance & Valuation
Year to date, Zoom’s stock is up a very respectable +19% although this has trailed the broader indexes and lagged the Zacks Internet-Software Market’s +33%. That said, it’s noteworthy that the Zacks Internet-Services Industry is in the top 14% out of 250 Zacks industries with Twilio (TWLO - Free Report) and Fortinet (FTNT - Free Report) being two notable standouts.
Image Source: Zacks Investment Research
Despite lagging behind its industry’s strong YTD performance, Zoom's stock is appealing in terms of valuation. To that point, ZM trades at a very reasonable 15.6X forward earnings multiple compared to the benchmark S&P 500’s 25.4X.
Plus, Zoom trades at a pleasant discount to its industry average of 32.6X forward earnings with Twilio and Fortinet at 28.6X and 44.2X respectively.
Image Source: Zacks Investment Research
Takeaway
Zoom Video’s stock sports a Zacks Rank #2 (Buy) following its favorable Q3 report and guidance. Earnings estimate revisions are likely to go up for Zoom in the coming weeks with the company’s attractive P/E valuation and consistency also supporting more upside.