If the company fails to deliver, a severe sell-off could be on tap, probably not to pre-pandemic price levels, but those buying today could experience heavy losses.
Why? This frothy valuation is predicated on its expected outsized growth. So far, today’s growth-oriented stock market doesn’t seem too worried about the rich valuation of ZM, but with the stock trading at a high forward P/E ratio of 148.2x, any sort of hiccup may be enough to fuel a near-term move lower. Just because Silicon Valley is doing it doesn’t necessarily mean that corporations elsewhere will follow suit, but as we’ve seen with other changes to the working environment, such as open offices, this trend is likely to trickle down to businesses large and small.įuture gains in the share price will likely be more gradual than what we’ve seen recently, but a continued shift to a permanent remote working environment could help push Zoom shares well above their all-time highs. Facebook ( FB) was one of the first, but now, other major Silicon Valley employers like Salesforce ( CRM) are making the leap as well. Several big tech names are adopting full-time, remote work policies. However, the bulls make a solid argument as to why it has more runway ahead. Risk-averse investors may be uncomfortable buying Zoom at its current high valuation. Analysts also expect a big improvement in non-GAAP earnings per share, with the consensus for the period coming in at $0.09 - up from $0.03 in the year-ago period.So, weighing the long-term trends against the potential risks, what’s the play? One could consider the shares a cautious buy at today’s prices, and a solid buy on any pullback.
On average, The Street is modeling for year-over-year revenue growth of about 81% during fiscal Q1. "So it's very early to tell whether or not that's going to convert long term into paying customers," Steckelberg explained.Īnalysts seem to be planning on an acceleration in Zoom's business as a result of COVID-19. Kelly, however, did say that much of the significant uptick in usage as a result of COVID-19 was related to free accounts. CFO Kelly Steckelberg said in the company's fiscal fourth-quarter earnings call that, as of March 4, it had already seen "significant usage" on its platform due to the coronavirus, and she noted that the company would "expand our capacity to meet the increased demands of both paid and free users." Since Zoom reported its fiscal fourth-quarter results in early March, management already has some visibility into how a rise in coronavirus cases was impacting its business. Zoom's fiscal fourth quarter was fueled primarily by a 61% year over year increase in customers with more than 10 employees and an 86% jump in customers contributing more than $100,000 in trailing-12-month revenue.
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