Zoom Video Analysts Cautious Following Earnings Beat: 'Rich Multiple Given Implied Deceleration'

Zoom Video Analysts Cautious Following Earnings Beat: 'Rich Multiple Given Implied Deceleration'

Zoom Video Communications Inc ZM shares are up 13.2% this week after the company reported better-than-expected fourth-quarter earnings numbers and issued bullish guidance for 2021.

For the fourth quarter, Zoom reported adjusted EPS of $1.22 on $882.5 million in revenue. Both numbers beat consensus analyst estimates of 79 cents and $811.8 million, respectively. Revenue was up 369% from a year ago.

Zoom also guided for fiscal 2022 revenue growth of 42%, suggesting the company will continue to put up extremely impressive growth numbers even when faced with difficult 2020 comps. Zoom’s business exploded when the pandemic hit in March 2020, forcing businesses and people to communicate online via Zoom’s video communication service.

Looking ahead to fiscal 2022, Zoom guided for adjusted EPS of between $3.59 and $3.65 and between $3.76 billion and $3.78 billion in revenue. In the near-term, Zoom guided for fiscal first-quarter adjusted EPS of between 95 cents and 97 cents on between $900 million and $905 million in revenue.

Impressive Growth Numbers: Needham analyst Richard Valera said Zoom’s success with Phone is a clear sign the company isn’t a one-trick pony.

“While we expect ZM shares to continue to be subject to volatility on rotation away from WFH names and/or concerns regarding tough comps in F2H22 and beyond, we think an enduring shift towards greater WFH and ZM's rapidly growing installed base into which it can cross-sell Phone, Rooms and future products, afford it the opportunity to double revenue again in the next 3-4 years,” Valera wrote.

Morgan Stanley analyst Meta Marshall said Zoom reported another quarter of impressive numbers, but the potential churn risk in the second half of fiscal 2022 keeps her cautions on the stock.

“We were encouraged in FQ4 by strong traction with upmarket and positive proof points with Phone, which should help Zoom trade above our base case for now, but questions of churn in 2H keep us more reserved,” Marshall wrote.

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