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Zoom Video Analysis From Long-Time Bull


April 02, 2020

Beth Kindig

Lead Tech Analyst

I recently discussed Zoom Video and its continued phenomenal rise. In the face of a global pandemic, the company has become the top performing stock on the NASDAQ this year with over 130% gains, or nearly a 160% spread with the 30% market decline.

From there, the stock has continually commanded the highest price-to-sales in the cloud software category and was able to hold its opening IPO price of $62 as support even when the market dumped cloud software last September with 30-40% drawdowns across the board.

So what’s Zoom’s secret?

Zoom’s easy access and URLs is the foundation of Zoom’s success. This is what we call product-market fit and why analysis on tech stocks should start with the product to maximize returns.

Product-market fit is what led me to call Zoom Video the best IPO of the year in 2019, why I encouraged investors to know their winners during the cloud selloff, and why we reiterated a buy signal on my research site when Zoom Video was at $65.

Read the full article here.

Zoom Video is a company where valuation defies logic. Zoom’s enterprise value/sales of 66 is the highest EV/Sales of any U.S. tech company valued at more than $500 million. The forward PE ratio is 260, although some of this reflects a company newly profitable.

Prior to going public, Zoom Video (ZM) had been doubling its revenue for the past three years and did this again for the fourth year. The company posted 100%+ revenue growth, climbing from $60M in revenue for fiscal 2017 to $330M in revenue for fiscal 2019. This is with gross profit margins in the high 70% to low 80% range.

Additionally, quarterly revenue also grew 78% same-quarter year ago to $188.3 million. Adjusted EPS was $0.15 compared to $0.04 EPS in the year-ago quarter. Q4 GAAP income grew 92% YoY to $10.6 million with adjusted non-GAAP income growing 292% YoY to $38.4 million. And total revenue grew 88% year-over-year to $622.7 million and revenue grew at a CAGR of 117% from FY 2017 to FY 2020.

Meanwhile, Zoom Video’s forward guidance shows a more tempered growth rate as the company approaches the $1 billion annual run rate. The median revenue estimate for Zoom Video is 48% growth in fiscal 2021 to $921.8 million and 39% growth in fiscal 2022. Management guidance for revenue is slightly lower than the consensus at $910 million in the mid-range for fiscal 2021. The median EPS guidance for FY 2021 is $0.45 and for FY 2022 is $0.58.

Finally, it’s worth mentioning that Zoom is outperforming both Google Hangouts and Microsoft Skype. The app is currently the second most downloaded mobile app, behind TikTok, according to app-analytics firm Sensor Tower. Citing data from tracking company Apptopia, The New York Times reported that close to 600,000 people had downloaded the iOS app in a single day earlier this month.

Read the full article here.

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