Shares of Zoom Video Communications (ZM) initially rose on Tuesday morning, but have pulled back to be in the red at midday, after the company crushed earnings per share estimates for its fiscal fourth quarter. Revenue surged 369% year-over-year also beating forecasts. Zoom additionally issued an upbeat forecast for the current quarter. Following the report, shares were upgraded to Overweight at Piper Sandler.

EARNINGS AND GUIDANCE: 

On Monday afternoon, Zoom Video reported Q4 adjusted EPS of $1.22, handily exceeding analysts' 79c consensus. Revenue for the quarter of $882.49M was up 369% and also beat the $811.77M Street consensus. In a statement, Zoom founder and Chief Executive Officer Eric Yuan said: "The fourth quarter marked a strong finish to an unprecedented year for Zoom. In FY2021, we significantly scaled our business to provide critical communications and collaboration services to our customers and the global community in response to the pandemic. We are humbled by our role as a trusted partner and an engine for the modern work-from-anywhere environment. Our ability to rapidly respond and execute drove strong financial results throughout the year." The executive added that "as we enter FY2022, we believe we are well-positioned for strong growth with our innovative video communications platform, on which our customers can build, run, and grow their businesses; our globally recognized brand; and a team ever focused on delivering happiness to our customers."

In the year-ago quarter, people began using Zoom more heavily as the Covid-19 pandemic fueled lockdowns around the world. During Q4, Zoom said it had accumulated more than 1 million seats paying for Zoom Phone, a service that allows people to virtually make and receive phone calls, route calls, and accept voice mail.

Looking ahead, Zoom forecast first-quarter EPS of 95c-97c on revenue of $900M-$905M, well ahead of analysts' current estimates of 72c and $804.78M, respectively. Fiscal 2022 EPS is expected at $3.59-$3.65, while revenue is forecast at $3.76B-$3.78B. Analysts had been forecasting FY22 EPS of $2.96 and revenue of $3.52B.

'VERY STRONG' END TO FY21: 

Piper Sandler analyst James Fish upgraded Zoom Video to Overweight from Neutral with a price target of $541, up from $501. The company reported a "very strong" end to fiscal 2021 and "better than feared" initial fiscal 2022 guidance, with Zoom Phone adoption and continued wins in Meetings both contributing to the upside, Fish told investors in a research note. The analyst sees "multiple secular tailwinds behind the business."

OTHER ANALYST COMMENTARY:

 Morgan Stanley analyst Meta Marshall raised the firm's price target on Zoom Video to $420 from $390 after the company's positive view on their FY22 outlook caused her to raise estimates. While churn risk seen in the second half of FY22 keeps her having an Equal Weight rating on the shares, Marshall noted that Zoom "remains in a leadership position" within the large unified communications opportunity.

PRICE ACTION: 

In early afternoon trading, shares of Zoom Video have slid about 3% to $397.69.