Target sales increased due to digital sales and the success of the holiday season. Zoom’s stock jumps after earnings drop, with Kohl pointing to stronger growth next year. Julie Hyman, Myles Udland and Brian Sozzi of Yahoo Finance analyze the numbers.
Video transcription
JULIE HYMAN: Well, we start with what’s going on with earnings. And specifically, let’s take a look at Zoom. The company’s stock has fallen from its rise in recent months. However, they are higher this morning, with revenues of up to $ 882.5 million. And you know, there was some concern about the slowdown in Zoom’s momentum. But this is the third consecutive quarter of growth of more than 300% if you are considering revenue growth year after year.
And as we start to lessen the effects of the pandemic, it will be an even bigger test for the company. But the company made a growth forecast for the fiscal year ended in January 2022, from 52% to 43%. This is ahead of what analysts have been looking for. So, Myles, it looks like they seem to be addressing some of those concerns, which was just a pandemic, for example.
MYLES UDLAND: Yes, and I think it was interesting to hear the administration talk a little bit about the thinking behind this orientation, which is how we see the landscape now. And there were some questions as to whether trends would return to normal, or if we started to return to something like normal life, how would you react to that?
And at least as far as I read, management said, well, I think we’ll find out if and when that happens. But I think it’s an incredible business story to see a company increase revenue to the size that Zoom already had. To be clear, this action did not cost a penny before the pandemic began. The action performed amazingly in 2019, when there was no COVID-19 pandemic, at least none that we knew of yet.
And then the stock certainly had an incredible run, almost 400%, revenue went up almost 400% in relation to its entire fiscal year 2020. But at the same time, when you see a performance like this of a name with such an event specific linked to it, this plan and really out of 20% of its high performance that we saw in the ongoing actions for almost six months, I’m not sure if it really refers to the management itself.
They are sitting with a lot of money. In the call, some questions were asked about what they would do with that money. And the answer is, we are still finding that out. In fact, they asked an analyst if you had any ideas, I think, tell us. But it is, Sozzi, as we have said a few times, a corporate story that went from 0 to 100 million Bajillian overnight.
And I think Zoom is probably still trying to find its legs as a company that is now on track to bring in nearly $ 4 billion in revenue next year, a trajectory that I don’t think they were planning for probably many, many years , you know, when you go back in time, just 18 months.
BRIAN SOZZI: Well, what you mentioned about money, I think is one of the two stories that investors need to watch on Zoom this year. They ended the quarter with $ 4.2 billion in cash. And they, at your point, yes, they were asked about it. And they said they were spending a lot of money on data centers. But you’re not going to spend $ 4.2 billion on building data centers around the world.
You will spend a large part of it, for sure, but I think all eyes will now turn to how that money will be spent. Are they going to buy other companies to further develop this platform? This is not yet determined. Do they go to the storage market, data storage market? This has not yet been determined. And the other thing I would note here is that Zoom is no longer, I think, just an initial video platform.
That’s why we know him. That’s why the stock skyrocketed. But now they are really thinking about building an entire platform. And they are now testing digital events, digital events and corporate digital event functions on the platform. And they want this to be their favorite destination for all things chat, video etc.
Now I’m sure that the people at Microsoft will have something to say about it. Still, Zoom is now thinking beyond just the core video business. In addition to Zoom phones, your Zoom phone business is finally, I think, starting to get to the point where analysts will be excited about it and start building their estimates.
JULIE HYMAN: Well, let’s talk about this with the CFO, Kelly Steckelberg, in a moment. I remember well in April 2019, when the company went public and we spoke to CEO Eric Yuan at that time. Remember that it was profitable when it went public, which is relatively rare today.
I just want to mention a few other companies that we are looking at this morning. The target is one of those. Comparable sales target in stores of up to 6.9%, digital comps more than doubling. Both were a slowdown, however, still relatively strong and the company’s earnings per share were above estimates as well. I know you’re watching this, Brian Sozzi, as well as what’s going on with Kohl this morning.
BRIAN SOZZI: Yes, if Target shares pop, we are not seeing much movement in the pre-market. I think what you saw in the fourth quarter, it was priced six months ago. What is important today, if you have shares in Target, are two things. One, investor’s day is today, a very important event for them every year. I think they will go out and guide how many stores they are going to open this year. Last year, they opened 30.
I would not be surprised if they increased it a little, given the momentum they have in their business. I would also check to see if President and CEO Brian Cornell comments on sales for the quarter.
We’ve seen retailers show up for the past week and a half saying, you know what? The first quarter started off really well. I would not be surprised if he made similar comments. And this may even stimulate the stock, perhaps a little more, but, again, to be determined.
JULIE HYMAN: And quickly talk to us about Kohl’s too. I know you just spoke to the activist who targets the company.
BRIAN SOZZI: Yes, so Kohl came out with earnings. And suffice it to say, yes, I just hung up the phone with Jonathan Duskin from Macellum Capital. And he is leading the activist group that came out last week and is totally on the attack here at Kohl’s. Let’s say he’s not exactly satisfied with this quarter and what they have to say. Let’s leave it at that.
But Kohl’s certainly has a different perspective in its quarter. Comps person Julia Fennelly sent out some notes this morning, noting that they are extremely confident in their prospects, although sales have fallen 10% and stocks have fallen by about 17% in the past two years.
They have a lot to prove. And I don’t think the activist is satisfied with the dividend replacement. It will not cut, share repurchases of $ 200 million to $ 300 million, which also did not please. I expected them to do a very epic performance at Kohl’s very, very soon. And he didn’t speak.
JULIE HYMAN: Looking forward to it.
BRIAN SOZZI: I would add that too. They didn’t talk. The two sides have not spoken since the campaign was announced last week.
JULIE HYMAN: Yes, and this is interesting and perhaps a little unusual compared to recent activist campaigns elsewhere.