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Number Crunch: Zoom’s Pandemic-Fueled Boom Continues

Zoom remains a pandemic winner.
(Daniel Constante)
(Daniel Constante)
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“Zoom Video Communications Inc. posted another quarter of record sales and again lifted its outlook as remote working and distance schooling drags on during the pandemic, but the growth has come with higher costs that disappointed investors,” WSJ writes.

Numbers To Consider:

  • Latest Quarterly Sales: $777.2 Million (366% increase from the previous year)
  • Latest Quarterly Profit: $198.4 Million
  • Gross Margin: 67% (4% decrease from the prior quarter)
  • Current Quarter Sales Expectations: $806 Million to $811 Million

Other Notable Facts:

  1. Zoom provides a chunk of its services free to users, including more than 125,000 K-12 schools, which weighed on its profitability.
  2. Zoom raised its guidance for a third time during the pandemic, expecting to reach $2.58 billion in sales for the current financial year ending in January.
  3. Shares of Zoom have grown roughly 7x this year.
  4. Its paid subscriber business has grown nearly six times its size and now has 433,700 paying subscribers with more than 10 employees.
  5. Customers who pay more than $100,000 per year have more than doubled as well.

Justin Oh:

Zoom Video Communications ($ZM) is down 13% on a great quarterly earnings report. What gives? 

The higher the valuation a company has, the higher the market’s expectation of earnings growth is. So when a stock is highly valued to the point of overvaluation, expectations have run so high that it can be almost impossible to meet those expectations. 

At over 55x gross profit, it’s a stock I’ve been cautioning against for the past quarter (and continue to caution against) due to overvaluation, especially with the spectre of “return-from-home” coming in the next year or so.

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