Repeat after me-- Zoom is not just a coronavirus stock
Brian Withers (ZM): It seems funny calling Zoom Video Communications stock a laggard after its incredible run over the past year. But so far this year it is trailing the S&P500 and is down off its October 2020 high of over 40%. This stock may have stalled, but there’s still lots to love about this video conference call specialist.
Even as we enter the fourth quarter that the coronavirus has accelerated Zoom’s growth, it is still putting up massive numbers all around.
|
Metrics |
Q4 FY2020 |
Q3 FY2021 |
Q4 FY2021 |
QoQ change |
YoY change |
|---|---|---|---|---|---|
|
Revenue |
$188 million |
$777 million |
$883 million |
14% |
369% |
|
Customers >$100k annual spend |
641 |
1,289 |
1,644 |
28% |
156% |
|
Net income |
$11 million |
$192 million |
$256 million |
33% |
2,315% |
Data source: Company earnings presentation. Note: Q4 FY2021 ended on Jan. 31, 2021.
Large customer growth and top line revenue are still hitting triple-digit year-over-year comps and because of the company’s ability to scale, its bottom line has skyrocketed. And yet, the stock is actually valued lower than it was before the coronavirus started. Today the video conferencing specialist price-to-sales ratio of 37 is more than 10% below where it was on Mar. 1, 2020.
Investors may be worried about Zoom’s ability to continue to put up solid growth numbers, but I’m not. Management has projected 42% year-over-year growth for the coming year and it has the levers to make it happen. Zoom phones are flying off the shelves and are expected to be a $23 billion market by 2024. Zoom rooms, which is the company’s software solution for conference rooms using inexpensive commodity hardware will enable companies to transition back to the workplace while allowing employees to continue to work from home. Lastly, its international business is still only a third of all revenue, growing at more than 2x the rate of the Americas region.
Is Zoom set up to bounce back in after its Q1, Q2, or second half of the year? No one can tell the future, but this company is executing at a high level and investors who get in today will be happy over the long run.
