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Farmer Dot McCarthy films one of her goats for a Zoom call at Cronkshaw Fold Farm in the North West of England on 9 February 2021.
Paul Ellis / AFP via Getty Images
Zoom video communication
Shares returned their initial gains after the company’s blowout report in January, amid ongoing concerns about the valuation and growth rate following the pandemic.
Zoom was a major beneficiary of the work-from-home-and-learn-from-home trends during the Covid-19 pandemic and showed revenue for the quarter of $ 882.5 million, up 369% as a year earlier, with adjusted earnings of $ 365.4 million, or $ 1.22 per share.
Zoom shares rose as much as 10% after 10 a.m. on Monday and opened sharply higher on Tuesday. However, profits have disappeared despite generally optimistic comments on the street. The stock, which traded at $ 440 earlier in Tuesday’s session, fell 7.4% in recent trading to $ 379.22.
The decline is likely for two reasons. One, Zoom’s astonishing series of quarters with three-digit growth seems to be coming to an end, as it now faces Covid-inflated comparisons between years. And even after falling back from previous highs, the stock is still trading at high multiple of sales and earnings.
Sterling Auty, analyst at JP Morgan, on Tuesday reiterated its Neutral rating on Zoom shares and raised its price target to $ 456 from $ 450, but warned in its remarks on earnings that it could be ‘the last hooray’ in the fantastic Covid driven enterprise of the company. run.
“The April quarter begins with the upswing to tighter comparisons, and investors will continue to discuss what the appropriate growth rate for Zoom will look like on this scale,” he writes. “There is still a tremendous growth opportunity in the market in the international as well as the Zoom Phone segment, but the question is the pace and pace of adoption after the pandemic.”
Zoom forecasts revenue of $ 900 million to $ 905 million for the April quarter, with non-GAAP earnings of 95 to 97 cents per share. The street predicted revenue of $ 804.8 million and a non-GAAP earnings of 72 cents per share.
Auty also sees the risk in the fact that accounts among 10 employees make up 37% of revenue. “We believe this customer base may pose a higher risk to rates in the future, as it is likely to be most affected if a vaccine becomes widely available,” he writes.
Tyler Radke, Citi, gained coverage on Tuesday with a neutral rating and $ 501 target price. “Although the annual lead was above expectations … we are concerned that the significant slowdown in growth during the year may weigh on the stock, especially as new product growth drivers are still too small to move the needle, ‘he writes. a research note.
For the January 2022 financial year, Zoom expects revenue of $ 3.76 billion to $ 3.78 billion, a 42% increase from the previous year at the center of the range, with non-GAAP earnings of $ 3.59 to $ 3.65 per share. The street previously forecast the January 2022 fiscal year with revenue of $ 3.52 billion with a non-GAAP earnings of $ 2.96 per share.
Radke’s interpretation of the guidelines for the year is that the growth of about 175% in the April term to the low teens in the second half will decline amid very difficult comparisons.
Piper Sandler analyst James Fish, on the other hand, responds to the earnings report by raising its rating to Neutral’s overweight, with a new price target of $ 541, compared to $ 501. “Previously, valuation and the high exposure to commercial monthly paying customers kept on the sidelines, “he wrote in a research note. “Although the quarter did not answer the last question, the main statistics indicate greater exposure to businesses and annual / perennial customers with a more digestible valuation given visibility.”
Oppenheimer analyst Ittai Kidron likes the quarter and he sees opportunities for the company to expand its reach into new areas. “Zoom still shows how critical it is in a digital world; we believe its relevance will remain high after Covid-19, ”he writes. But the valuation of the stock – 25 times its estimate for sales in 2022 – leaves him stagnant, and he maintains his Perform rating.
Write to Eric J. Savitz at [email protected]