Where Is Zoom Video (NASDAQ: ZM) Going Next?

Friday, June 11, 2021 | Sam Quirke
Where Is Zoom Video (NASDAQ: ZM) Going Next?Few companies encapsulated 2020 and the market’s surprising reaction to the pandemic more than Zoom Video (NASDAQ: ZM). Having only IPO’d the previous spring, they came into this new decade close to all-time lows but quickly started realizing their potential once offices shut and employees started working from home. Shares jumped 150% from January to March 2020, but that was really only a sign of what was to come. 

At their peak, around October of last year, they were up a staggering 800% on the year. That was also right around when COVID vaccines were starting to be approved and the momentum in equities swung from growth and tech names to what was still beaten down value, travel, and retail names. Their shares are currently trading down around 40% from their all-time high but to be fair have held onto much of their 2020 gains. Having consolidated and traded sideways for much of 2021, it’s probably a good time to take stock of their potential for the second half of this year and beyond. 

Triple-Digit Growth

Earlier this month the company reported their Q1 earnings, and both Wall Street and Main Street alike got some good insight into their revenue engine and what might be in store over the coming months. Zoom’s Q1 EPS smashed analyst expectations while revenue also came in ahead of the consensus with an impressive 191% year on year jump. Keep in mind that this time last year the same print was up 170% so they can’t be accused of slowing down their expansion. Free cash flow was 62% higher than expected and management also guided higher for their Q2 numbers and their full-year 2021 numbers. 

By any measure, it was a stellar report, with plenty of indications that they made the most of the hype that surrounded the stock last year and has captured market share both upstream and downstream. The number of customers paying more than $100,000 a year was up 160% compared to Q1 of last year while the number of customers with more than 10 employees was up 80% over the same period. 

Zoom’s CEO, Eric Yuan, struck a deservedly bullish tone with the release when he said “we kicked off the fiscal year with a very strong first quarter, posting 191% total year-over-year revenue growth combined with strong profitability and cash flow. Our steadfast commitment to empowering customers to work and learn from anywhere with our expansive, innovative, and frictionless video communications platform continued to drive our results. With this solid start, we are pleased to raise our total guidance range to $3.975 billion to $3.990 billion for the full fiscal year”.

Though it took a few sessions, the bulls quickly gained control after the release and shares have rallied more than 8% in the past week, putting them up 25% over the past month. For all that though, there are still plenty of voices calling for caution, not least because of the company’s triple digit price-to-earnings (PE) ratio. This was undoubtedly one of the reasons Zoom saw its shares slide in the first half this year, as growing concerns about a fast-growing inflation print took the shine of tech stocks for many investors. But even then there was no catastrophic retracing towards pre-COVID levels and shares look to be comfortably treading water around the same levels they traded at last September.

Getting Involved

Considering the vaccine rollout is inching towards completion and employees are starting to return to the office, there’s a lot to be said for the fact that Zoom shares are trending upwards at the same time. We also saw the major indices shrug off a 5% inflation print this week, as they all closed in on fresh all-time highs. If this is the new normal, then it looks good on Zoom. 

Investors know it might be a while before the green field opportunity of 2020 repeats itself, but Zoom looks to have made the most of it and has set itself up for continued success. It might be a painful hold if you only bought into their shares last October, but for those of us on the sidelines now and considering a position, there’s a lot to like.

Where Is Zoom Video (NASDAQ: ZM) Going Next?

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7 Stocks to Buy Now and Avoid a Summer Swoon

Summer is generally a quiet time in the markets. Institutional investors, generally speaking, take some time away. In fact, that’s where the idiom “Sell in May and Go Away” comes from.

But quiet doesn’t mean uneventful. The world still moves along even in the lazy months of summer. And at the moment, there are two conflicting views driving the market.

One is the fear that everything’s a bubble that is just about to burst. We don’t recommend you get out of stocks, but let’s face it, things are more than just a little frothy.

But there’s another view summarized by the acronym, YOLO (as in You Only Live Once). And these investors are committed to keeping the markets going higher. Even if it means going “all in” (whatever that means to them) on risky asset classes like NFTs or Dogecoin.

We sincerely hope you take time to recharge (whatever that means to you) this summer. Whatever your personal beliefs, the reopening of our economy is a moment that deserves to be celebrated by all of us. But before you do, we recommend that you take a peek at these seven stocks that you can consider adding to your portfolio before you check out for the summer. These are likely to get as hot as a firecracker on the Fourth of July and should have you smiling when the summer ends.

View the "7 Stocks to Buy Now and Avoid a Summer Swoon".


Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Zoom Video Communications (ZM)1.4$375.59+1.7%N/A129.51Hold$426.58
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