S&P 500   5,091.08 (+0.08%)
DOW   39,112.80 (+0.11%)
QQQ   437.45 (-0.14%)
AAPL   182.57 (-0.98%)
MSFT   409.97 (-0.41%)
META   483.36 (-0.57%)
GOOGL   143.58 (-0.35%)
AMZN   174.22 (-0.21%)
TSLA   192.53 (-2.47%)
NVDA   797.02 (+1.48%)
NIO   5.44 (-7.01%)
AMD   176.74 (-2.82%)
BABA   75.82 (-0.39%)
T   16.80 (+1.27%)
F   12.15 (+0.25%)
MU   85.98 (+0.08%)
CGC   3.40 (+0.89%)
GE   153.25 (+1.04%)
DIS   107.61 (-0.03%)
AMC   4.44 (+0.45%)
PFE   27.81 (+0.94%)
PYPL   59.20 (+1.46%)
XOM   103.74 (-0.97%)
S&P 500   5,091.08 (+0.08%)
DOW   39,112.80 (+0.11%)
QQQ   437.45 (-0.14%)
AAPL   182.57 (-0.98%)
MSFT   409.97 (-0.41%)
META   483.36 (-0.57%)
GOOGL   143.58 (-0.35%)
AMZN   174.22 (-0.21%)
TSLA   192.53 (-2.47%)
NVDA   797.02 (+1.48%)
NIO   5.44 (-7.01%)
AMD   176.74 (-2.82%)
BABA   75.82 (-0.39%)
T   16.80 (+1.27%)
F   12.15 (+0.25%)
MU   85.98 (+0.08%)
CGC   3.40 (+0.89%)
GE   153.25 (+1.04%)
DIS   107.61 (-0.03%)
AMC   4.44 (+0.45%)
PFE   27.81 (+0.94%)
PYPL   59.20 (+1.46%)
XOM   103.74 (-0.97%)
S&P 500   5,091.08 (+0.08%)
DOW   39,112.80 (+0.11%)
QQQ   437.45 (-0.14%)
AAPL   182.57 (-0.98%)
MSFT   409.97 (-0.41%)
META   483.36 (-0.57%)
GOOGL   143.58 (-0.35%)
AMZN   174.22 (-0.21%)
TSLA   192.53 (-2.47%)
NVDA   797.02 (+1.48%)
NIO   5.44 (-7.01%)
AMD   176.74 (-2.82%)
BABA   75.82 (-0.39%)
T   16.80 (+1.27%)
F   12.15 (+0.25%)
MU   85.98 (+0.08%)
CGC   3.40 (+0.89%)
GE   153.25 (+1.04%)
DIS   107.61 (-0.03%)
AMC   4.44 (+0.45%)
PFE   27.81 (+0.94%)
PYPL   59.20 (+1.46%)
XOM   103.74 (-0.97%)
S&P 500   5,091.08 (+0.08%)
DOW   39,112.80 (+0.11%)
QQQ   437.45 (-0.14%)
AAPL   182.57 (-0.98%)
MSFT   409.97 (-0.41%)
META   483.36 (-0.57%)
GOOGL   143.58 (-0.35%)
AMZN   174.22 (-0.21%)
TSLA   192.53 (-2.47%)
NVDA   797.02 (+1.48%)
NIO   5.44 (-7.01%)
AMD   176.74 (-2.82%)
BABA   75.82 (-0.39%)
T   16.80 (+1.27%)
F   12.15 (+0.25%)
MU   85.98 (+0.08%)
CGC   3.40 (+0.89%)
GE   153.25 (+1.04%)
DIS   107.61 (-0.03%)
AMC   4.44 (+0.45%)
PFE   27.81 (+0.94%)
PYPL   59.20 (+1.46%)
XOM   103.74 (-0.97%)

Zoom Video Continues to Work Through Normalization

Zoom Video Continues to Work Through Normalization

Key Points

  • Revenue growth has fallen from a blinding +350% during the pandemic to just under 5% in Q3 2022
  • Zoom enabled remote work and play for the masses during the pandemic solidifying hybrid work as a cornerstone in the post-pandemic new normal
  • Investors fear a continued slowdown in growth as outlook is muted as Zoom continues to cut estimates
  • The strong U.S. dollar cut top line revenue growth to 5% from 7% in constant currency
  • Zoom trades at 19X forward earnings with a 7.3% short interest
  • 5 stocks we like better than Zoom Video Communications

Zoom Video NASDAQ: ZM has gone from an obscure but easy-to-use video communications platform to becoming a verb synonymous with video conferencing and remote engagement driven by the COVID-19 pandemic. Zoom Video was one of the major benefactors of the pandemic that helped usher in the “new normal” of hybrid work in a post-pandemic world. While other video calling tools were available, Zoom’s incredibly easy interface brought video conferencing to the mainstream masses. The Company’s growth has since peaked as normalization continues to set in. The question is where the baseline is for Zoom and what catalysts can help it speed growth back up. The Company compete with many teleconferencing and business collaboration software companies like Adobe NASDAQ: ADBE, Microsoft Teams NASDAQ: MSFT, Salesforce NASDAQ: CRM, Google Workspace NASDAQ: GOOG, Cisco Webex Meetings NASDAQ: CSCO and even Verizon NYSE: VZ with its BlueJeans Meetings app.  The Company wants to become a unified communication platform with the addition of email and calendar functions. It has also partnered with AMC Entertainment NYSE: AMC to turn some locations into Zoom meeting rooms


Growth Continues to Slow

On Nov. 21, 2022, Zoom Video released its third-quarter fiscal 2023 results for the quarter ending October 2022. The Company reported earnings-per-share (EPS) profit of $1.07 beating consensus analyst estimates for a profit of $0.84 by $0.23. Revenues rose 4.9% year-over-year (YoY) to $1.1 billion, matching consensus analyst estimates for $1.1 billion. $100,000 annual run rate (ARR) customers rose 31% to 3,286. Enterprise customers rose 14% YoY to 209,300. Enterprise revenue rose 20% YoY to $614 million. Online average monthly churn was 3.1% down 60 basis points from same period last year. Zoom Video ended the quarter with $5.2 billion in cash and cash equivalents and marketable securities. Zoom Video CEO Eric Yuan commented, “Our customers are increasingly looking to Zoom to help them enable flexible work environments and empower authentic connections and collaboration. Proactively addressing these needs with Zoom's expanding platform continues to be our focus in this dynamic environment.”

Lump of Coal Guidance

Zoom Video issued downside guidance for fiscal Q4 2023 with EPS between $0.75 to $0.78 versus $0.82 consensus analyst estimates. Fiscal Q4 2023 revenues are expected to come in between $1.095 billion and $1.105 billion versus $1.12 billion. Incidentally, constant currency revenues are expected between $1.12 billion to $1.13 billion. Total fiscal 2023 revenues are expected between $4.370 billion to $4.380 billion and $4.42 billion to $4.452 billion in constant currency. Non-GAAP EPS for full-year fiscal 2023 is expected between $3.91 to $3.94 with 304 million weight average shares outstanding.

Analysts Cut Price Targets

Piper Sandler lefts its Neutral rating unchanged but cut its target price to $77 from $84 per share. Analyst James Fish was underwhelmed by its Q4 lump of coal outlook and concerned for the declining total customer base as the rate of new business continues to decelerate. Baird kept its Outperform rating but slashed the price target for Zoom shares to $95 from $100 per share. Analyst William Power felt the Q3 2022 results were solid, but its outlook remained mixed due to currency headwinds are weaker deferred revenues. Zoom remains a top holding at 8.31% in the Ark Innovation ETF NYSEARCA: ARKK operated by famed fund manager Cathie Wood.

Zoom Video Continues to Work Through Normalization

Weekly Descending Triangle Risk

The weekly candlestick chart illustrates the potential for a descending triangle breakdown as it makes lower highs against a flat low at $70.44. Shares continue to reject off the falling weekly 20-period exponential moving average (EMA) now at $87.97. The Q3 2022 earnings reaction further accelerated the selling towards the $70.44 low area before a coil attempt failed to trigger the weekly market structure low (MSL) buy trigger above $81.50. Distribution volume rose upon the earnings release but was moderate compared to nearly double the volume on its Q2 2022 earnings sell-off. The weekly stochastic bounce through the 20-band stalled on the selling pressure setting it up for a potential crossover back down as shares near the flat lower trendline of the weekly triangle. As the channel between the falling upper trendline and flat trendline gets tighter towards the apex, shares will either breakout by triggering the weekly MSL or finally breakdown through the swing lows. This should resolve by the end of the year. Pullback support levels to watch sit at the $70.44 swing low, $67.60, $64.75, $60.97, %57.59, $54.54, and the $50.55.

→ AI Stock Caught Trading Under Secret Name (From The Oxford Club) (Ad)

Should you invest $1,000 in Zoom Video Communications right now?

Before you consider Zoom Video Communications, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Zoom Video Communications wasn't on the list.

While Zoom Video Communications currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

20 Stocks to Sell Now Cover

MarketBeat has just released its list of 20 stocks that Wall Street analysts hate. These companies may appear to have good fundamentals, but top analysts smell something seriously rotten. Are any of these companies lurking around your portfolio? Find out by clicking the link below.

Get This Free Report

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Zoom Video Communications (ZM)
4.4712 of 5 stars
$63.17+1.7%N/A86.54Hold$79.00
ARK Innovation ETF (ARKK)N/A$48.53+0.1%N/AN/AN/AN/A
AMC Entertainment (AMC)
3.1082 of 5 stars
$4.47+1.1%N/A-1.08Strong Sell$9.75
Adobe (ADBE)
4.8557 of 5 stars
$555.23+3.3%N/A47.01Moderate Buy$613.14
Microsoft (MSFT)
4.87 of 5 stars
$410.19-0.4%0.73%37.09Moderate Buy$411.06
Salesforce (CRM)
4.7027 of 5 stars
$292.80-0.3%N/A111.33Moderate Buy$269.86
Cisco Systems (CSCO)
4.9342 of 5 stars
$49.06+1.0%3.18%14.91Hold$56.36
Alphabet (GOOG)
3.7554 of 5 stars
$145.04-0.2%N/A25.01Buy$146.33
Verizon Communications (VZ)
4.6306 of 5 stars
$40.70-0.1%6.54%14.75Moderate Buy$44.00
Compare These Stocks  Add These Stocks to My Watchlist 

Jea Yu

About Jea Yu

  • JeaYu21@gmail.com

Contributing Author

Trading Strategies

Experience

Jea Yu has been a contributing writer for MarketBeat since 2018.

Areas of Expertise

Equities, options, ETFs and futures; fundamental, qualitative, quantitative and technical analysis and pattern identification; active and swing trading; trading systems and methodology development

Education

Bachelor of Arts, University of Maryland, College Park

Past Experience

U.S. equity markets trader, writer and analyst for over 25 years. Published four books by publishers McGraw-Hill, John Wiley & Sons, Marketplace Books and Bloomberg Press. Speaker at various expos and seminars and has been quoted and featured in USA Today, The Wall Street Journal, Traders Magazine, The Financial Times and various trade publications, including Stocks & Commodities, Active Trader and Online Investor.


Featured Articles and Offers

Microsoft Stock to $450? Here's How

Microsoft Stock to $450? Here's How

Microsoft's stock price is pulling back following the Q4 results, suggesting a top is in play, but investors should not be so quick to shed their shares.

Search Headlines: