– Buy Zoom Stock On the Dips?
Zoom’s stock (NASDAQ: ZM), an American communications technology focused videotelephony and online chat services through a cloud-based peer-to-peer software platform, has gained 4.1x – moving from about $76 to $310 since the end of FY 2020 and as per consensus analyst estimates the stock price could potentially go up by more than 40% over the current price of $310. The company hugely benefited from the shift toward remote workplace due to the lockdown restrictions as the Covid-19 pandemic raged across the world. The company saw significant improvement in adding new customers, as in Q4 2021 (ended January 2021) they reached 467,100 customers, up 470% y-o-y. Though, there are very few big ticket customers – 1,644 customers contributed more than $100,000 in revenue in the fiscal year. Our dashboard, ’Buy or Sell Zoom Stock?’ provides the key numbers behind our thinking, and we explain more below.
Zoom’s revenues saw a massive growth of 326% from $0.6 billion in FY 2020 to $2.6 billion in FY 2021. In the same period, the net income margin has risen to 25.3% in FY 2021 from 3.5% in the previous fiscal year. This, in turn, saw EPS grow from $0.09 in FY 2020 to $2.37 in FY 2021. Zoom’s P/S multiple increased to 39.8x toward the end of FY 2021, but has decreased slightly to 33.2x currently.
How Is Coronavirus Impacting Zoom’s Stock?
The IT software and service industry saw a boom in 2020 as the onset of the pandemic led people toward digital products and digitalization. This momentum is expected to continue in Q1 2021 (ended April 2021) results which are due on June 1, 2021. As per consensus analyst estimates the company is expected to post revenue greater than $900 million while earnings are expected to be around $1.00 per share. At the current level Zoom’s stock is 47% below its all-time high. The stock saw a fall when the pandemic eased in certain countries toward the end of 2020, as certain investors expected the growth to taper off once the pandemic faded. Nevertheless, the company continued to record good results in the last six months of the fiscal year 2021 (ended January 2021). This sell-off has made the stock attractive. Going forward, we believe the company should benefit from many businesses contemplating a shift toward remote working even in a post Covid-19 world.
For further comparison among peer groups, it is helpful to see how they stack up. Google Comparison With Peers summarizes how Google compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.
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