Zoom enlarged $ 1.75 billion. Morgan Stanley says the street is too bearish.

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Zoom video communications

the shares are being prepared after the company priced an offer of 5.15 million shares at $ 340 each, generating revenue 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 holdings of cash and marketable securities, which totaled $ 1.87 billion at the end of the October quarter. Zoom (ticker: ZM) has no long-term debts.

Stifel analyst Tom Roderick says the deal adds financial flexibility, but believes the total should be higher for the company to grow substantially through acquisitions. “While [the company now has] a considerable war chest, cash alone does not necessarily set potential targets such as

RingCentral

or

Twilio

on the table without a huge component of the stock in such a business “, he wrote. “As Zoom builds its global scale, a 10-figure war will be beneficial for building aggressive infrastructure as needed.”

Roderick said the company revealed on Tuesday that it had reached one million users for the cloud-based Zoom Phone service.

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

Meanwhile, Meta Marshall, analyst Morgan Stanley, reiterated its rating at equal weight and price of 390 USD. but he said he believes investors have become too discouraged about the post-Covid outlook.

“While we were once cautious, the evaluation was ahead [the long-term] opportunity, decreasing by almost 40% compared to the largest, we believe that the market has probably become a little too negative “, wrote Marshall. She said the data on Zoom Phone shows how quickly the platform can add applications, a factor she said investors seem to have missed.

Marshall said he expects Zoom to use the money raised to expand the platform’s services.

“I would note that the company has not said anything publicly about potential acquisitions and acquisitions, but that expanding the platform, similar to what they did with Phone, makes sense as a way to generate money from the installed base,” she wrote. . “We continue to believe that the company’s 400-450 million customers are the most profitable of potential customers, with application extensions in this area being the most sensitive for us.”

The main beneficiary of the work-from-home trend, Zoom shares rallied over 760% from the end of 2019 to the intraday peak, at $ 588.84 on October 19. % by Tuesday’s close. Zoom shares rose 5.5% to $ 376.44 on Wednesday afternoon.

Write to Eric J. Savitz at [email protected]