⏯ Are Zoom’s Best Days Behind It?

Airline shares tank on rising fuel prices.


Hey Global Investor! Here’s what you need to know before the US markets open.

Market Snapshot 📈

S&P 500 (Monday’s Close) 4,201.09 -127.78 (2.95%)

NASDAQ (Monday’s Close) 12,830.96 -482.48 (3.62%)

FTSE 100 (5:15 PM IST) 6,954.14 -5.34 (0.07%)

NIFTY 50 (Today’s Close) 16,013.45 +150.30 (0.95%)

USDINR (Today’s Close) 76.99 (1 Year +5.27%)


🔥 Top Movers

JJN +69.47%
BBBY +34.18%
SES +29.09%

VORB -20.40%
MLCO -19.87%
AZUL -19.03%


⏯ Zoom: Buffering Too Long?

Zoom Video Communications (ZM) beat analyst estimates in Q4. But overshadowing everything are the troubles plaguing the company. What’s up with Zoom? (Tweet This)

Peaking Too Soon?

Zoom stole the spotlight pretty early in the pandemic. If anyone wanted to communicate anything at all, Zoom was more or less the default platform. Zoom’s growth peaked in November 2020, much before the pandemic’s second, third, and fourth waves.

Growth zoomed, and so did its share price. By October 2020, Zoom’s market cap stood at $160B and within reach of arch-rival Cisco Systems’ market cap of $170B. The irony was that Zoom’s founder Eric Yuan was an early developer at WebEx, which Cisco had acquired in 2007.

Zoom reports its results in the February-January format. In Q4 FY2022, the company surpassed estimates, but the devil lies in the details. That was until Microsoft pulled all the stops on the Teams product.

Key Highlights From Q4FY22:

  • Revenue: $1.07B Vs $1.05B expected
  • Earnings Per Share: $1.29 Vs $1.06 expected

Back in Q4 2021, revenue had grown 369% Y-o-Y. In the subsequent four quarters, Y-o-Y revenue growth has stuttered to 191%, 54%, 35%, and 21% in that order. That last growth number is the slowest in the company’s history.

Companies with over 10 employees have been a major contributor of revenue to Zoom. In Q4, these companies contributed to 67% of Zoom’s revenue (up from 63% in Q4 FY2021 and up from 66% in Q3 FY2022).

So where’s the issue, you ask? For the first time as a public company, Zoom reported a decline in customers with over 10 employees. The number fell to 509K from 512K in Q3 FY2022. On a Y-o-Y basis, that number grew 9%.

For the current quarter (Q1 FY2023), Zoom anticipates revenue ranging from $1.07B to $1.075B (12% growth Y-o-Y). This is also lower than analyst expectations of $1.1B. For the full year FY2023, the company hopes to clock revenue of $4.54B (up 10% Y-o-Y), lower than the analyst estimate of $4.71B. EPS is expected to be around $3.48, a far cry from $4.41 per share estimates.

Battling Mediocre Growth

So what does the company do to stem the flow of bad news? It changes the way it slices and dices the data. Starting with the current quarter, Zoom will no longer report figures of customers with over 10 employees. Instead, it will be reporting data from the Enterprise customers.

Who are these, you wonder? According to Zoom, these customers have engaged with Zoom’s direct sales team, channel partners, or independent software vendor partners. Supposedly highly retentive, in Q4 FY2022, Zoom had 191K enterprise customers, a 35% Y-o-Y growth. However, for FY2023, Zoom expects the Enterprise business to grow 20%  Y-o-Y.

Zoom also announced the Zoom Contact Center, which will enable companies to interact with customers. Agents, supervisors, and administrators can use over 100 features to gauge customer sentiment. The product will first launch in the US and Canada, with international markets to follow later in the year.

While the Americas contribute to two-thirds of the company’s overall topline, Zoom sees international expansion as a major opportunity for future growth. Revenue for the Americas market grew 21% Y-o-Y while the APAC & EMEA combined revenue grew 23% Y-o-Y.

Also, in this past quarter, Zoom closed its largest-ever deal in EMEA with over 200K meetings licenses. It also expanded its partnership with Deutsche Telekom by developing a joint solution, specifically for the German market.

On October 19, 2020, Zoom’s shares were at an all-time high of $568.34. Since then, they’ve fallen 80%. The company has now announced a $1B share buyback. With Microsoft Teams capturing the large corporate accounts and going after Zoom with everything it has, it’s anybody’s guess whether Zoom’s glory days are behind it.

Zoom as a stock is taking too long to buffer for the investors’ liking. The company will have to find a quick pivot to ensure that investors don’t end the call at a time when they need to stay on the most!

Market Reaction
ZM ended at $107.88, down 0.97%.

Company Snapshot 📈

ZM $107.88 -1.06 (0.97%)

Analyst Ratings (33 Analysts) BUY 48%  HOLD 48%  SELL 4%


Newsworthy 📰

Bucking The Trend: Bed Bath & Beyond shares jump after GameStop chairman reveals big stake (BBBY +34.18%)

Oil On The Boil: Airline stocks slump as jet fuel surge overshadows travel rebound (UAL -15.01%)

Joining The Club: Microsoft suspends sales in Russia as Western sanctions tighten (MSFT -3.78%)


Later Today 🕒

  • Bumble Inc. Earnings (BMBL)
  • Casey’s General Stores Inc. Earnings (CASY)
  • Dick’s Sporting Goods Inc. Earnings (DKS)
  • DoubleVerify Holdings Inc. Earnings (DV)
  • MongoDB Inc. Earnings (MDB)
  • Oracle Corp. Earnings (ORCL)
  • Stitch Fix Inc. Earnings (SFIX)
  • Petco Health & Wellness Co. Inc. Earnings (WOOF)
  • 7:00 PM IST: Foreign Trade Deficit

Today’s Market Terminology: Bear Trap

A bear trap is a predicament facing short-sellers when a bear market reverses its trend and becomes bullish. The asset continues to sell in anticipation of further decline in prices, and short-sellers are forced to cover at higher prices


Disclaimer: The content of this article has been created and published by Winvesta India Technologies Pvt. Ltd., in order to ease the reader’s understanding of the subject matter. The information and/or content (collectively “Information”) provided herein is general information sourced through various news reports and does not constitute a research report or a research analysis. The Information is not intended to offer advice, target or solicit any particular customer or group of customers to buy or sell securities. 

Winvesta does not render any research or advisory services and provides a more detailed description of its services on its website and mobile application along with the terms and conditions published therein from time to time. While reasonable care has been exercised to ensure that the Information is adequate and reliable, no representation is made by Winvesta as to its accuracy or completeness and Winvesta, its affiliates, subsidiaries and employees accept no liability of whatsoever nature for any direct or consequential loss, including without limitation any loss of profits, arising from reliance on this Information. Neither Winvesta nor any of its affiliates are acting as an investment adviser, research analyst or in any other fiduciary capacity. Accordingly, reader’s are expected to undertake their own due diligence in consultation with their own advisors and are advised not to solely rely on the Information. Any such reliance shall be at the reader’s own risk. 

All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. There is always the potential of losing money when you invest in securities, or other financial products. Investors should consider their investment objectives and risks carefully before investing.


Start Building Your Global Portfolio Today

Download Winvesta App now to Get Started