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Zoom Video Inc. posted strong earnings and forecasts in its first results as a listed company on Thursday, and spoke of the huge market potential ahead – but the numbers still do not justify its valuation.
Nevertheless, the actions of Zoom
ZM, + 1.78%
after 11 hours after the company announced earnings above Wall Street expectations. Zoom investors were clearly pleased that the company did not disappoint, after an amazing IPO in April, when it largely outperformed the debut of Pinterest, the best-known online scrapbooking company, its stocks having exploded more than 70%.
The company's second-quarter forecast also exceeded expectations: An analyst in the earnings conference asked if the better-than-expected revenue forecasts were due to the recent evolution of Zoom Phone, a telephone system. in cloud for businesses launched in January. Eric Yuan, president, CEO and enthusiastic co-founder of Zoom, said the Zoom Phone would further contribute to the future, and that there would be costs to hire more salespeople.
Zoom's incursion into phone calls, one of his potential for future growth, led to the question of why the phone was as cheap as video conferencing on the Internet. Patrick Walravens, analyst at JMP Securities, summarized the situation in these terms: "Are there as many possibilities around Zoom Phone as in Zoom meetings? I'm not sure that the level of pain around the phone is the same. Yuan responded that many customers still use complex and obsolete PBX phone systems and could potentially upgrade.
The company also broadcast the revenue call with the help of its Zoom Video product, similar to that of Microsoft.
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Skype, in which each analyst asked his question with very good audio quality. An analyst who failed to operate his camera has been offered a new camera by Yuan, and another has drawn his attention thanks to his experience in the Golden Gate Bridge. Executives joked (somehow) that they could not make a face of the questions analysts asked them when making their video calls.
Zoom's product strategy is similar to that of companies such as Atlassian Corp.
TEAM, + 1.01%
, Slack, Dropbox Inc.
DBX, -0.17%
and others who place their initial customers in a small part of a company with a free product, and as the product gains ground, the software is gaining more and more adoption up to # That the customer has so many users that they need a business account.
Zoom's executives also continued to tout the total addressable market data that has thrilled many investors during the company's roadshow. "So, more than a billion knowledge workers work in the world, but today, if you look at the use of video, this one is still very small," Yuan said. . "I think, just the focus on the TAM today. [total addressable market]$ 43 billion in the market, as long as we do not lose our focus, I think that will be of great concern to us over the next few years. "
Some analysts, however, struggled to justify the valuation of the company. Its stock market price of about $ 79.43 is currently trading at around 32 times the sales estimates for the year 2020, while its peers are trading at around 14.2 times the estimates of the turnover figure. 2020. According to FactSet, eight analysts believe that it is a restraint, three say it is a purchase and has a sales rating.
Zoom is an impressive company, with a good product, a strong and committed management team and – which is particularly unusual in this recent batch of IPOs – – profits. It also had revenue growth of 103% in the first quarter. But the company's three-figure revenue growth seems to be starting to slow down from its record highs – 149% and 118% in fiscal years 2018 and 2019, respectively – as is typical of young companies. Investors might want to consider Zoom Video as fully valued at the moment.
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