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Farmer Dot McCarthy is filming one of her goats for a Zoom call at Cronkshaw Fold in northwest England on February 9, 2021.
Paul Ellis / AFP through Getty Images
Zoom video communications
the shares returned to their original earnings following the January quarter earnings report of the company’s explosion, amid continuing concerns about valuation and the company’s post-pandemic growth rate.
A major beneficiary of the trends of working from home and learning at home during the Covid-19 pandemic, Zoom reported revenue for the quarter of $ 882.5 million, up 369% from a year earlier, with adjusted earnings of $ 365.4 million or $ 1.22 per share.
Zoom shares rallied up to 10% during trading hours on Monday and suddenly opened higher on Tuesday. Earnings, however, have disappeared despite generally optimistic comments on the street. The stock, which traded up to $ 440 earlier in Tuesday’s session, fell 7.4% to $ 379.22 in recent trading.
The decline is probably for two reasons. One, the amazing string of Zoom’s three-digit growth quarters seems to be coming to an end, as it now faces year-to-year comparisons inflated by Covid. And two, even after withdrawing from previous highs, the stock continues to trade at large multiples of sales and gains.
JP Morgan analyst Sterling Auty on Tuesday repeated its neutral rating on the Zoom stock, raising the price target to $ 456 from $ 450, but warns in its post-earnings research note that it could be the “last hurricane” in fantastic company run by Covid. run.
“The April quarter is starting to ramp up to tougher comparisons, and that will make investors continue to discuss what the appropriate post-pandemic growth rate will look like for Zoom at this scale,” he writes. “There is still an extraordinary amount of growth opportunities on the market, both in the international and Zoom Phone segments, but the question 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 profits of 95 to 97 cents per share. Street projected revenue of $ 804.8 million and non-GAAP profits of 72 cents per share.
Auty also sees a risk in the fact that accounts with less than 10 employees accounted for 37% of revenue. “We believe that this customer base could pose a higher risk for churn rates in the future, given that it is most likely to be affected if a vaccine becomes widely available,” he writes.
Tyler Radke from Citi took over the coverage of the action on Tuesday with a Neutral rating and a target price of 501 USD. “While annual guidance has exceeded expectations … we are concerned that a significant slowdown in year-round growth could affect the stock, especially with product growth engines still too small to move the needle,” he wrote in a statement. 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 middle of the year, with non-GAAP earnings of $ 3.59 to 3, $ 65 per share. Previously, the street projected revenue in the January 2022 fiscal year of $ 3.52 billion, with non-GAAP profits of $ 2.96 per share.
Radke’s interpretation of this year’s guide is that growth will drop from about 175% in the April quarter for low-income teens in the second half, amid very difficult comparisons.
Piper Sandler analyst James Fish, on the other hand, responded to the earnings report by raising his rating to Neutral’s Overweight, with a new target price of $ 541, up from $ 501. “Previously, the evaluation and high exposure to commercial customers with monthly payments have kept us on the sidelines,” he wrote in a research note. “While the quarter itself did not address the latter concern, potential indicators suggest greater exposure to the company’s customers and annual / multiannual customers, with a more digestible assessment given the visibility.”
Oppenheimer’s analyst Ittai Kidron liked the quarter and sees opportunities for the company to expand its coverage into new areas. “Zoom continues to show how critical it is in a digital world; we believe that its relevance will remain high after Covid-19 “, he writes. But the stock’s valuation – 25 times its estimate for 2022 sales – gives it a break and maintains its Perform rating.
Write to Eric J. Savitz at [email protected]