As nations locked down and businesses went online, Zoom Video Communications, Inc. (ZM) software became a household name. The firm seemed to dominate the industry and became almost ubiquitous with the work-from-home crowd. However, as more economies have reopened and workforces leave the cyberspace (in moderation), the company is now facing the need to adapt. (See Zoom stock charts on TipRanks)
Ryan Koontz of Needham & Co. reported on Zoom’s mixed earnings results and outlook. He wrote that while the company did beat Wall Street consensus estimates on revenue by 3%, the quarter-over-quarter growth was the least in more than four years.
Koontz rated the stock a Hold, and did not provide a price target.
The five-star analyst mentioned that the small enterprise sector has been dragging on the company’s future outlook, as it has been experiencing slowing growth as well as businesses leaving the platform. Koontz defined small businesses as those with fewer than 10 employees. He added that this customer demographic makes up about 36% of Zoom’s revenue, thus a decline seen here could be highly detrimental.
Zoom reported strong acceleration in users of its Phone platform, although Koontz did state that it faces still competition. According to the analyst, RingCentral (RNG) is more well-established and currently leads the industry.
The video conferencing software company reported strong earnings per share, boosted by low operating expenses and healthy gross margins. Despite these encouraging prints, Koontz is concerned “that ZM may be forced to renegotiate its all-stock acquisition for Five9 [(FIVN)].” The company is carrying heavy weight on its shoulders and its short-term success remains uncertain.
On TipRanks, ZM has an analyst rating consensus of Moderate Buy, based on 11 Buy and 10 Hold ratings. The average Zoom price target is $391.44, reflecting a possible upside of 31.16%. This statistic is accurate as of intraday trading prices Wednesday 10:10am EST.
Disclosure: At the time of publication, Brock Ladenheim did not have a position in any of the securities mentioned in this article
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