Zoom Communications
In many ways, Zoom was the premier stock during the most acute phase of the pandemic. It was one of the few stocks that didn't go lower during the March 2020 crash, and it was one of the first to make new highs. Culturally, the stock was also quite meaningful as it enabled remote work, online schooling, and allowed people to virtually meet face-to-face.
Thus, it's not surprising that the stock has been a leading indicator of sorts not only in terms of bottoming before the rest of the market. It also topped in October 2020 and then chopped around these highs, while other growth stocks didn't peak until the early months of 2021.
Overall, Zoom is down about 83% from its highs and has nearly retraced its entire advance following the 2020 lows despite revenue growing by more than fivefold over the last 2 years. Now, the stock is showing some hints of outperformance, and Q1 earnings were also constructive.
Inside the Numbers
In Q1, Zoom reported $1.03 per share in earnings, beating expectations of $0.87 per share. Revenue slightly beat expectations at $1.073 billion vs $1.07 billion. This was a 14% increase from last year.
Another factor lifting shares higher was the company's strong Q2 guidance which shows continued earnings growth due to lower costs even with revenue growth slowing. For the quarter, it sees revenue between $1.15 billion and $1.2 billion, which was slightly above estimates. It sees EPS between $0.90 and $0.92, above estimates of $0.87 per share. For the full year, Zoom sees revenue of around $4.5 billion and EPS of $3.73 which are above analysts' estimates.
Of course, its major headwind continues to be that people are moving back to more normal patterns of work and life which means less use of the platform. That being said, it seems that hybrid and remote work is here to stay at much more significant levels than pre-pandemic.
For the full fiscal year, Zoom expects revenue between $4.53 billion and $4.55 billion, versus the $4.55 billion analysts anticipated. It expects earnings between $3.70 and $3.77 per share, versus the $3.53 analysts were expecting, according to Refinitiv.
Despite some improvements including a return to profitability, Zoom is probably better as a trade vehicle rather than an investment. It's too expensive to entice value investors, and the company's revenue growth is flat-lining which means it won't appeal to growth investors.
