Zoom Video Stock: Price Slumps as the Video Collaboration Giant Lowers Forecast
November 25 2022 - 06:54AM
Shares of video-collaboration
company Zoom Video (NASDAQ:
ZM) are down over 4% in early market trading today
after it issued weaker-than-expected guidance for the fiscal year
2023 (ending in January).
In fiscal Q3 of 2023, Zoom Video
reported revenue of $1.10 billion with adjusted earnings of $1.07
per share. Comparatively, analysts estimated Zoom to post revenue
of $1.10 billion and adjusted earnings of $0.84 per share in the
quarter that ended in October.
Zoom now expects revenue in
fiscal 2023 to range between $4.37 billion and $4.38 billion,
marginally lower compared to analyst forecasts of $4.4 billion. Its
adjusted earnings are estimated at $3.91 per share, again lower
than consensus estimates of $3.94 per share.
ZM stock price is currently
trading almost 90% below all-time highs, valuing the company at
$22.6 billion by market cap.
Let’s see if ZM stock can stage a
comeback in the next 12 months and outpace the broader markets
Zoom stock price has been impacted by slowing revenue
The COVID-19 pandemic
Zoom to increase sales
from just $622 million in
fiscal 2020 to $2.65 billion in fiscal 2021 and $4.09 billion in
fiscal 2022 as the work-from-home trend accelerated
However, since peaking in October
2020, Zoom’s stock price has grossly underperformed the market and
is down 50% year to date, wiping off significant investor
In Q3, its sales rose by just 5%
year over year, while in the second quarter, revenue growth stood
at 8%. Its net income also slumped to $48.4 million compared to a
net income of $340 million in the year-ago period.
Zoom is currently wrestling with
the triple whammy of the reopening of economies, an increase in
competition from giants, including
MSFT), and an extremely
So, more meetings are now taking
place in person, and those happening online are now occurring on
several other platforms, such as Microsoft Teams.
Zoom ended the quarter with
209,300 enterprise customers, up from 204,100 customers in the
previous quarter. While Zoom claims it continues to maintain market
share, new deal wins are taking much longer to close.
Zoom also attributed a strong
U.S. dollar to its lower guidance for 2023 and expects sales to
grow by 5% year over year in Q4. The company’s management did not
provide any guidance for the next fiscal and maintained they are
now prioritizing investments thoughtfully.
What next for ZM stock price and investors?
Yes, Zoom is impacted by slowing
top-line growth, but its balance sheet remains strong, with a cash
balance of more than $5 billion. It recently acquired an
artificial intelligence-powered chat-based system and continues
to allocate resources toward the development of new products,
including a digital phone platform.
During its Investor Day
presentation this year, Zoom forecasted its addressable market to
expand to $125 billion in 2026, up from $34 billion in 2019,
providing the company with enough room to re-accelerate revenue
growth in the future.
Zoom also maintained its
customers that generate more than $1 million in annual recurring
revenue now stand at close to 250, up from 27 three years ago.
Further, customers with an ARR of more than $100,000 has increased
almost 5x from 700 to 3,286.
Zoom is now eyeing international
expansion to drive sales higher while also planning to release new
features that include Zoom Mail and Zoom Calendar. These new
features should translate into robust sales numbers, especially if
they can gain traction among enterprises.
Valued at 5x forward sales and
21x forward earnings, Zoom is not too expensive and might gain pace
once market sentiment improves.
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