Zoom investors look to post-pandemic 2021 even with big Q3 expected

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Zoom founder Eric Yuan is located in front of the Nasdaq building as the logo of the video-conferencing software company Zoom appears on the screen, following the opening ceremony in New York City on April 18, 2019.

Cana Betanur | Getty Images

Zoom is set to show another Monster Quarter when it reports on Monday, with sales growth expected to top 300% for the second straight period.

But latecomers are looking at this earnings report, along with and after. It is the back half of 2021 that becomes challenging for Zoom as the company must then compare the wild growth period of the epidemic and the increase in remote work.

Additionally, a Kovid-19 vaccine appears on the horizon for 2021. Both Pfizer-BioNtech and Modern have reported preliminary results that their respective Kovid vaccines were about 95% effective, while the Oxford-AstraZeneca vaccine had an average efficacy of 70%. .

It’s unclear what happens to Zoom’s business when people start returning to the office, but the company’s stock has been sold on positive vaccine news.

On November 9, Pfizer said for the first time that its vaccine candidate showed a 90% efficacy rate, Zoom shares lost 17%. The stock has made up for some of those losses, but is up 24% from the previous month.

It makes sense that Zoom has grown nearly seven times this year, reflecting the company’s rapidly growing but niche cloud software application from home tech staples used for office workers, students and virtual appointments. is.

Zoom vs S&P 500 this year

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Millions of families across the country had to resort to video chat for their Thanksgiving celebrations last week, whether it was on Zoom, Google Meet, Microsoft Teams or Apple’s FaceTime. They will likely do the same through the winter holiday season.

Analysts say that for the third quarter, which ended in October, Zoom expects revenue growth of 317% to $ 694 million, as surveyed by Refinitive. The fiscal second quarter increased by 355% and 169% in the period ending April.

In the current quarter, which ends in January, Zoom’s growth is projected to be strong at 288%, followed by 116% in the next period. Then things start to slow dramatically – in the teens – based on analyst estimates.

Vaccine headwinds

Earlier this month, research firm Eleazar Advisors lowered its rating on Zoom from “strong buy” to “buy”. Chaim Siegel, an analyst at Elazar, said that in order to have a “strong buy”, the firm would have to look ahead to a 45% share as well as an “honest wow” over the next 12 months.

“[Zoom] That wow, no doubt, “Siegel wrote. But Pfizer’s going to be a conceptual headwind with the vaccine.”

A Zoom spokesperson said the company does not comment on financial matters during its quiet period.

The reality for Zoom is that it is difficult to live up to the expectations of investors after such a historic rally. Despite having less than half its price-to-sales ratio before the epidemic, the stock is still trading at 98 times revenue and nearly 42 times sales for the next financial year.

Shareholders will listen closely to company officials for comment on what the potential pipeline looks like when people are working from office again. The company also faces increased competition from Microsoft and Google, which have in recent months bumped up their video-conferencing products and have become aggressive in pricing.

Nevertheless, some investors view any stretch as a purchase opportunity given the quality of Zoom’s products and the possibility that some version of Remote Action is here to stay.

Siti Panigrahi, an analyst at Mizuho Securities, wrote, “We continue to see the advantage in the COVID-19 scenario even after a zoom, as its video conferencing solution has become an important component of companies during COVID-19.” Stock, in a report on 9 November. “The epidemic has also increased recognition of its long-term importance in the new normal, post-epidemic workplace that will emerge in the coming years.”

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