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Zoom Video Communications, Inc. (ZM) added 22.74% in after-hours trade Monday after the video conferencing company reported blowout quarterly results as people and businesses rushed to the platform to stay connected while staying closer to home during the pandemic.
The firm posted adjusted earnings of 92 cents per share on revenues of $663.52 million. Analysts had expected a profit of 45 cents a share and sales of $500.5 million. Moreover, top- and bottom-line growth increased by 355% and 1050%, respectively, from the year-ago period.
Management cited an accelerated shift to remote working, distance learning, and socializing for the better-than-expected quarter. “Organizations are shifting from addressing their immediate business continuity needs to supporting a future of working anywhere, learning anywhere, and connecting anywhere on Zoom’s video-first platform,” CEO Eric Yuan said in a statement cited by Barron’s.
As of Sept. 1, 2020, Zoom stock has a market capitalization of $91.71 billion and trades a whopping 378% higher on the year. In the past three months alone, the shares are up 80%. However, the stock comes with a lofty valuation, trading at over 200 times projected earnings.
Looking Ahead
The company substantially hiked its guidance for the current quarter, now expecting earnings per share (EPS) of 73- to 74 cents and revenues of $2.37 million to $2.39 million. It had previously forecast EPS of 35 cents on sales of $493 million.
Wall Street Outlook
Analysts remain bullish on Zoom Video stock on the back of more users signing up for paid plans after trialing a free account earlier in the pandemic. Research firms are also impressed with the company’s ability to grow its market share. “Zoom has captured the biggest portion of market share, increasing from 34% of total MAU’s back in March, to over 48% as of July 24th,” JP Morgan analysts wrote in a recent note to clients. The stock currently receives 11 ‘Buy’ ratings, 3 ‘Overweight’ ratings, 13 ‘Hold’ ratings, and 5 ‘Sell’ ratings.
Wall Street Outlook and Trading Tactics
While most stocks plunged to multiyear lows during the coronavirus sell-off, Zoom Video shares flipped previous resistance into support at the $105 level. Since then, the price has continued to trend sharply higher, with only minor pullbacks to the 50-day simple moving average (SMA). Given that the relative strength index (RSI) indicates short-term overbought conditions, traders should look to buy pullbacks to major support areas, namely at $280 and $175, rather than chasing recent gains.