Zoom Video: $1 5B Buyback Is A Game-Changer NASDAQ:ZM
In the fiscal year ending Jan. 31, 2019, Zoom recorded $330.52 million in revenue, resulting in net income of $7.58 million. That represents significant growth from the previous year’s revenue of $151.48 million and net loss of $3.82 million. Zoom’s marketing strategy https://forexbroker-listing.com/ includes a direct sales force and strategic partners, but the company said it also relies on organic introductions to new clients through existing clients hosting meetings. Last year, 55 percent of the firm’s $100,000 clients began with free discovery.
About ZM Stock
Zoom Video in early March said company President Greg Tomb, a former cloud computing executive at Alphabet’s (GOOGL) Google, will leave. Upgrade to MarketBeat All Access to add more stocks to your watchlist. The company is scheduled to release its next quarterly earnings announcement on Monday, May 27th 2024.
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The company seems to have entered a mature stage in which growth is expected to remain in the mid-single digits and management should focus on profitability and its shareholders. Yet, the company reported SBC expenses of $1.3 billion in FY23, resulting in it only barely making a GAAP profit. Financially, https://forex-review.net/umarkets/ Zoom has outperformed expectations in 2023, showing resilience in revenue and achieving better-than-expected growth. However, concerns persist, particularly in terms of market share losses, persistent stock-based compensation (SBC) expenses, and the company’s high reliance on M&A for future growth.
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- There are currently 2 sell ratings, 10 hold ratings and 6 buy ratings for the stock.
- Only on a non-GAAP basis do we arrive at a forward P/E for Twilio of 22x.
- A higher fair value than the current market price drives investors’ interest in buying the stock, leading to its price moving higher.
- Zoom Video is free cash flow-profitable and achieves decent margins as well.
- Sales in its enterprise segment were $660 million last quarter, which amounts to roughly 58% of total revenue.
18 Wall Street analysts have issued “buy,” “hold,” and “sell” ratings for Zoom Video Communications in the last year. There are currently 2 sell ratings, 10 hold ratings and 6 buy ratings for the stock. The consensus among Wall Street analysts is that investors should “hold” ZM shares. A hold rating indicates that analysts believe investors should maintain any existing positions questrade forex they have in ZM, but not buy additional shares or sell existing shares. Mixed analyst reports and volatile financial markets mean it is unknown how Zoom’s share price will fluctuate in the future. However, it managed to increase its stock price by 200% in a period when the S&P 500 dropped by 17%, and has outperformed several high-profile tech stocks like Slack and Uber.
At a discounted price, the stock can make for a great buy; there’s no reason it should be trading near the levels it was at in 2019. Although its long-term prospects are uncertain, given its cheap valuation, Zoom is still a solid stock worth adding to your portfolio. But even though Zoom’s year-over-year revenue growth isn’t soaring, it continues to be positive (see chart below). Although it’s not at the same levels as a few years ago, that growth rate was unsustainable to begin with. The fact that revenue hasn’t fallen drastically is a testament to the strength and popularity of Zoom’s service.
A “Zoom Meeting” refers to a videoconferencing session hosted on its cloud infrastructure. Paid Zoom business plans cost $15 or $20 per employee and require minimums of 10 or 50 seats. In July 2021, Zoom Video and Five9 (FIVN), which automates call center services, announced a deal to merge.
Zoom Video Communications (ZM 1.25%) has given investors some frustration in recent years. The stock price is down more than 80% since the start of 2021, back when the coronavirus pandemic was still in many people’s minds and “social distancing” was still a key phrase. Investors who have held on to the stock since the start of the pandemic likely lost all or most of the impressive gains the stock saw in 2020. But to date, there’s little evidence to show that Zoom can dominate in the enterprise market at anything approaching the level that it once did in the consumer niche.
The one area of modest strength is non-GAAP (adjusted) free cash flow, which increased almost 14% yearly to more than $1.1 billion in the first three quarters of 2023. That was not enough to persuade investors to buy Zoom stock, as it is up just 1% from year-ago levels. Ark Invest has backed estimates up by taking a significant position in the media stock. Zoom makes up almost 7% of its flagship fund, the Ark Innovation ETF, making the Cathie Wood investment its fourth-largest holding.
The good news here for shareholder is that they can expect a return of this free cash flow as the company announced a $1.5B Class A common stock buyback yesterday. Although Zoom Video gave no timetable for its stock buyback, the company could return almost all of this year’s FCF to shareholders. At a current share price of $68, the buyback could allow Zoom Video to repurchase about ~7% of its outstanding shares. For the next fiscal year, the consensus earnings estimate of $4.96 indicates a change of +1.3% from what Zoom Video is expected to report a year ago.
The emergence of formidable competitors, particularly Microsoft Teams (MSFT), equipped with advanced AI capabilities and seamless integration, has eroded Zoom’s once-dominant position. While a commendable effort, the company’s attempts to enter the productivity market with Zoom Docs may face challenges against established players like Microsoft Office and Google Docs (GOOG) (GOOGL). For fiscal 2025, Zoom said it expects earnings of $4.86 per share at the midpoint of its outlook vs. estimates of $4.66 per share. The company said it expects revenue of roughly $4.6 billion vs. estimates of $4.637 billion. In the enterprise market for business customers, revenue rose 5% to $667.3 million, topping estimates of $658 million.
