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Farmer Dot McCarthy films one of his goats for a Zoom visit at Cronkshaw Fold Farm in northwest England on February 9, 2021.
Paul Ellis / AFP via Getty Images
Zoom Video Communications
the shares recovered their initial gains after the explosion in the January quarter earnings report, amid continuing concerns about the company’s assessment and post-pandemic growth rate.
A major beneficiary of trends in working from home and learning from home during the Covid-19 pandemic, Zoom reported quarterly revenue of $ 882.5 million, an increase of 369% over the previous year, with adjusted earnings of $ 365 , 4 million, or $ 1.22 per share.
Zoom’s shares rose up to 10% after the market closed on Monday, and opened higher on Tuesday. The gains, however, have declined, despite Street’s generally optimistic comments. The stock, which traded at $ 440 at the start of Tuesday’s session, fell 7.4% to $ 379.22 in recent trading.
The decline is likely for two reasons. First, Zoom’s surprising sequence of three-digit growth quarters appears to be coming to an end as it now faces year-over-year comparisons inflated by Covid. And two, even after falling behind previous highs, the stock continues to trade at high multiples of sales and earnings.
JP Morgan analyst Sterling Auty repeated his neutral rating for Zoom shares on Tuesday, raising his price target from $ 450 to $ 456, but warns in his post-earnings research note that it could be “the last straw” in the fantastic business of the company run by Covid runs.
“The April quarter begins to ramp up in more difficult comparisons and this will keep investors continuing to discuss what the appropriate post-pandemic growth rate for Zoom will be on this scale,” he writes. “There is still a huge opportunity for growth in the market, both in the international and Zoom Phone segments, but the issue will be the rate and pace of post-pandemic adoption.”
Zoom projects 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 projected revenue of $ 804.8 million and non-GAAP earnings of 72 cents per share.
Auty also sees risk in the fact that accounts with less than 10 employees represent 37% of revenue. “We believe that this customer base may pose a greater risk of turnover rates in the future, as it is more likely to be affected if a vaccine becomes widely available,” he writes.
Citi’s Tyler Radke took stock coverage on Tuesday with a neutral rating and a target price of $ 501. “While the annual guidance was above expectations … we fear that the significant slowdown in growth over the year can weigh on the stock, especially with the growth drivers of new products still too small to move the needle, ”he writes in a research note.
For the fiscal year of January 2022, Zoom expects revenue of $ 3.76 billion to $ 3.78 billion, an increase of 42% over the previous year at the midpoint of the range, with non-GAAP gains of $ 3 , 59 to $ 3.65 per share. Street previously predicted revenue of $ 3.52 billion for the fiscal year of January 2022, with non-GAAP earnings of $ 2.96 per share.
Radke’s interpretation of the guidance for the year is that growth will fall from around 175% in the April quarter to a low figure in the second half amid very difficult comparisons.
Piper Sandler analyst James Fish, on the other hand, responded to the earnings report by raising its rating from Neutral to Overweight, with a new target price of $ 541, above $ 501. “Previously, the valuation and high exposure to commercial customers who pay monthly kept us on the sidelines, ”he writes in a research note. “Although the quarter itself did not address this last concern, the main metrics suggest greater exposure for corporate and annual / multi-year customers ahead, with a more digestible assessment given the visibility.”
Oppenheimer analyst Ittai Kidron enjoyed the quarter and sees opportunities for the company to expand its reach in new areas. “Zoom continues to show how critical it is in the digital world; we believe that its relevance will remain high after Covid-19 ”, he writes. But the stock valuation – 25 times his estimate for 2022 sales – makes him hesitate and he maintains his assessment of Perform.
Write to Eric J. Savitz at [email protected]