Zoom Video Soars as Street Applauds ‘Slam-Dunk Debut’ Earnings
Zoom Video Soars as Street Applauds ‘Slam-Dunk Debut’ Earnings
(Bloomberg) -- Zoom Video Communications Inc., one of the top U.S. IPOs so far in 2019, surged Friday after it dazzled Wall Street with its better-than-imagined first quarterly earnings as a public company.
Shares climbed 15% in pre-market trading, flirting with a record high. The video-conferencing company posted results that topped expectations Thursday after the bell, encouraging investors to push the stock’s 121% run since its IPO in mid-April even higher.
It was a “slam-dunk debut,” Oppenheimer analyst Ittai Kidron told clients. Zoom reported adjusted earnings of 3 cents per share, better than the Street’s consensus estimate of 1 cent, and impressed investors with year-over-year revenue growth of 103%.
“We’re positive on Zoom’s value proposition (customer dynamics, TAM opportunity, profitable) and see material upside to guidance,” Kidron said in a note, maintaining a market perform rating. “That said, Zoom likely needs some time to grow into its valuation.”
Kidron wasn’t the only one to hedge enthusiasm with concern over the stock’s valuation. Analysts are largely neutral on the stock, with Bloomberg data showing 10 recommendations to hold, seven to buy and one to sell. The average price target is $78, about 2% below where the stock price as of Thursday's close.
Here’s what else Wall Street has to say:
Piper Jaffray, Alex Zukin
Zukin boosted price target to $100 from $90 after Zoom outperformed “even our ‘upside scenario' '' with year-over-year revenue growth of 103%. Zukin said “the efficiency of ZM’s go-to-market model was also on full display,” with operating margins of 6.7% beating the Street’s estimate by 600 basis points.
Piper noted that Zoom said the quarter's biggest surprise was “the widespread success of the sales organization, with no region or segment delivering sub-standard results.”
Rates the stock overweight.
JMP, Patrick Walravens
Noted a well-received video tool, a freemium-pricing sales model that takes advantage of “the viral nature of video communications” and a massive $43 billion market opportunity as the company expands into cloud voice, team applications and IP telephony lines. Still, Walravens said shares were fairly valued and suggested “investors should wait for a lower entry point to own this high-quality name.”
He told clients Zoom’s results were “some of the best financial metrics we have seen in the software world.”
Rates market perform.
Stifel, Tom Roderick
Increased price target to $80 from $75 as the first quarter beat lends “some support for the meteoric run of this recent IPO.” Roderick said Zoom’s “growth rate at scale is virtually unprecedented in software,” but is hesitant on the stock’s valuation.
Rates hold.
Rosenblatt, Ryan Koontz
Boosted price target to $80 from $60 given Zoom was “red hot out of the gate” with its first quarter earnings and revenue beat. But, he said the company’s conservative second half guidance of just 46% in expected revenue growth was difficult to reward.
Rates neutral.
To contact the reporter on this story: Sydney Maki in New York at smaki8@bloomberg.net
To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Courtney Dentch
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