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Farmer Dot McCarthy films one of her goats for a Zoom visit at Cronkshaw Fold Farm in northwest England on February 9, 2021.
Paul Ellis / AFP via Getty Images
Zoom video communication
The shares returned their initial earnings following the company’s erupting quarterly earnings in January amid ongoing concerns about both the company’s valuation and post-pandemic growth.
Zoom was a major beneficiary of the home working and home learning trends during the Covid-19 pandemic, reporting revenue of $ 882.5 million for the quarter, 369% more than a year earlier, with an adjusted profit of $ 365 .4 million, or $ 1.22 per share.
Zoom stocks rose a whopping 10% in after-hours trading on Monday and opened sharply higher on Tuesday. However, earnings have faded despite generally optimistic Street commentary. The stock, which previously traded as low as $ 440 during Tuesday’s session, fell 7.4% to $ 379.22 during recent trading.
The decline is likely for two reasons. First, Zoom’s astounding triple growth quarter appears to be coming to an end as it now faces Covid-blown year-over-year comparisons. And two, even after a drop from past highs, the stock continues to trade at lofty multiples of sales and earnings.
JP Morgan analyst Sterling Auty reiterated its Neutral rating for Zoom stock on Tuesday, raising its price target from $ 450 to $ 456, but warns in his post-earning research note that this could be “ the last hurray ” in the fantastic Covid-driven running.
“The march towards tougher comparisons will begin in the April quarter and will lead investors to continue to argue about what the right post-pandemic growth will look like for Zoom on this scale,” he writes. “There is still a tremendous amount of growth opportunities in the market, both in the global segment and in the Zoom Phone segment, but the question is the speed and pace of adoption after the pandemic.”
Zoom expects revenue of $ 900 million to $ 905 million for the April quarter, with non-GAAP earnings of 95 to 97 cents per share. The Street had estimated revenues of $ 804.8 million and non-GAAP earnings of 72 cents a share.
Auty also sees the risk in the fact that 37% of its turnover accounts for less than 10 employees. “We believe that this customer base may pose a higher risk to future rate movements, as this is most likely to be affected when a vaccine becomes widely available,” he writes.
Citi’s Tyler Radke picked up stock coverage on Tuesday with a neutral rating and a target price of $ 501. “While the annual outlook was ahead of expectations … we are concerned that the significant slowdown in growth during the year on the inventory, especially as the growth engines for new products are still too small to move the needle, “he writes in a research note.
For the January 2022 fiscal year, Zoom expects revenue of $ 3.76 billion to $ 3.78 billion, up 42% from the previous year in the mid-range, with non-GAAP revenue of $ 3.59 to $ 3.65 per share. The Street had previously estimated fiscal year January 2022 revenue of $ 3.52 billion with non-GAAP earnings of $ 2.96 per share.
Radke’s interpretation of the outlook for the year is that growth will fall from about 175% in the April quarter to the lowest number of teens in the second half amid very difficult comparisons.
On the other hand, Piper Sandler analyst James Fish responded to the earnings report by upgrading his rating to Overweight from Neutral, with a new price target of $ 541, up $ 501. paying customers us on the sidelines, “he writes in a research note. “While the quarter itself didn’t answer the latest concerns, key metrics suggest greater exposure to corporate and annual / multi-year customers with a more digestible valuation given the visibility.”
Oppenheimer analyst Ittai Kidron liked the quarter and sees opportunities for the company to expand its reach into new areas. “Zoom continues to show how crucial it is in a digital world; we think the relevance will remain high after Covid-19, ”he writes. But the stock’s valuation – 25 times his estimate for 2022 sales – gives him a pause, and he keeps his Perform rating.
Write to Eric J. Savitz at [email protected]