The company's shares skyrocketed accordingly, nearly tripling in value between April and October. The California-based teleconferencing platform went from a fairly successful unicorn to part of the pandemic lexicon in a few short months, increasing its daily meeting participants 30-fold and posting year-on-year revenue growth above the 360% mark. Key figures from the third-quarter reportįew companies fared better than Zoom Video Communications (ZM) throughout the Covid-19 pandemic.Or if you prefer, the stock trades for 23 times trailing-12-month free cash flow and at about 24 times analyst expectations for current-year free cash flow. Based on the new guidance, Zoom stock trades for about 29 times expected current-year adjusted earnings. In other words, Zoom raised its outlook for profitability while simultaneously cutting the number of shares it expects to issue (via stock-based compensation to employees). Previously, it said to expect adjusted earnings of $3.45 to $3.51 based on about 312 million shares outstanding. Management said it now expects full-year adjusted earnings per share to be between $3.70 and $3.77 based on a total share count of 309 million. And Zoom is upping its game on that front. Investors want profits in this market dominated by inflation and a hyper-focus on the Federal Reserve's interest rate hikes to tame price increases. The outlook for the balance of the year is for revenue to rise about 10% to 11%. As a result, revenue increased just 12% year over year for the quarter. Of course, Zoom's Achilles heel at the moment is that the jump in larger business subscribers is being offset by smaller businesses and individual users letting their subscriptions go. In this market, it's all about the bottom line Even as the pandemic eases, I don't think business travel will ever be the same, thanks to Zoom. After all, if executed correctly, virtual meetings can be far more efficient than in-person meetings and save a business substantial costs in travel. Nevertheless, I still like Zoom's strategy right now as it goes after corporate accounts with employees who could use video conferencing. Personally, my worst bear-case scenario for Zoom is a negative return over the next few years (due to plenty of competition and stagnating revenue growth). Things can always go from bad to worse, especially in a world that rewards you one minute for having the right service at the right time (digital video during economic lockdowns), only to punish you the next minute (digital video during economic reopening). An even loftier prediction has Zoom at $2,000 per share by 2026.Ī "worst-case scenario" return of 500% seems, well. ARK is calling for $700 per share in a bear-case scenario, implying a more than 500% return from current levels. Growth investor Cathie Wood and her investment firm, ARK Invest, released some wild 2026 price targets for Zoom subsequent to the first-quarter report.
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