Zoom increased by $ 1.75 billion. Morgan Stanley says the street is very low.

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Zoom Video Communications

the shares are recovering after the company priced an offer of 5.15 million shares at $ 340 each, generating revenues of $ 1.75 billion before expenses. This is slightly higher than the $ 1.5 billion originally targeted.

The offer will nearly double the company’s investments in cash and marketable securities, which were $ 1.87 billion at the end of the October quarter. Zoom (ticker: ZM) has no long-term debt.

Stifel analyst Tom Roderick says the deal adds financial flexibility, but he thinks the total would have to be higher for the company to achieve substantial growth through acquisitions. “While [the company now has] big war chest, money alone doesn’t necessarily pose potential targets like

RingCentral

or

Twilio

on the table without a large inventory component in such a deal, ”he wrote. “As Zoom builds its global scale, a 10-digit war box will also be beneficial for building aggressive infrastructure as needed.”

Roderick noted that the company disclosed on Tuesday that it reached one million users for its cloud-based Zoom Phone service.

“Zoom has made remarkable advances in a short time with the Zoom Phone,” he wrote, noting that the service is only two years old. “Looking to the future, we expect Zoom to focus on expanding its relationship with current video customers obtained from the pandemic and boosting sales opportunities through the company’s growing set of products.” Roderick maintained a Hold rating for the stock, with a target of $ 450 for the price.

Meanwhile, Morgan Stanley analyst Meta Marshall reiterated his assessment of equal weight and a target price of $ 390. But said he thinks investors have become very pessimistic about the post-Covid outlook.

“Although we were already cautious, the assessment was ahead of [the long-term] opportunity, out of almost 40% of the highs, we think the market has probably become a little negative, ”wrote Marshall. She said the Zoom Phone data shows how quickly the platform can add apps, a factor she said investors seem to have overlooked.

Marshall said he hopes Zoom will use the money raised to expand the services the platform offers.

“We would notice that the company hasn’t said anything publicly about the potential for mergers and acquisitions, but the expansion of the platform, similar to what they did with Phone, makes sense as a way to monetize its installed base,” she wrote. “We continue to think that the 400-450 million corporate customers are the most profitable potential customers, with app extensions in this area making the most sense for us.”

One of the main beneficiaries of the work from home trend, Zoom shares rose more than 760% from the end of 2019 to the intraday peak at $ 588.84 on October 19. But since then everything has had a big sale, with shares falling more than 40% until Tuesday’s close. Zoom’s shares rose 5.5% to $ 376.44 on Wednesday afternoon.

Write to Eric J. Savitz at [email protected]