Zoom Crashes: Time to buy the Dip With ETFs?

Zoom’s (ZM) second-quarter fiscal 2023 adjusted earnings of $1.05 per share beat the Zacks Consensus Estimate by 14.13% but decreased 22.8% year over year. Revenues of $1.09 billion missed the consensus mark by 1.5%. Shares of the company fell 16.5% in the key trading session after it reported its slowest quarterly revenue growth on record at 7.6% year over year, approximately $16 million below the lower end of the quarterly guidance.

A stronger U.S. dollar, which had an impact of approximately $8 million, weaker new online sales, and to a lesser extent backend linearity in the quarter were the biggest factors contributing to the revenue miss.

Guidance Cut

Zoom Video Communications lowered its annual profit and revenue forecasts as demand for the video-conferencing platform fell from pandemic highs amid stiff competition from Microsoft Teams and Cisco WebEx, per Reuters.

Inside the Results

Revenues from Enterprise customers grew 27% year over year and represented 54% of total revenues, up from 46% in second-quarter fiscal 2022. The number of Enterprise customers grew 18% year over year to over 204,100. The company reported a trailing 12-month net dollar expansion rate for Enterprise customers of 120%.

In the fiscal second quarter, Zoom customers contributing more than $100,000 in revenues in the trailing 12 months grew 37% to 3,116. These customers accounted for 26% of revenues, up from 20% in the year-ago quarter.

Cathie Wood Buys Zoom’s Dip

Ark Investment’s Cathie Wood purchased Zoom Video Communications Inc’s shares as they dropped. Two Ark Investment Management LLC funds bought more than 800,000 shares on Tuesday, which were worth $68.25 million as of the day’s close, according to Ark’s daily trading data compiled by Bloomberg. The latest purchase marks Ark’s first purchase of the video-conferencing company’s shares in three months.

Zoom had seen monumental success during the peak of the pandemic. However, the firm has been struggling as workplaces reopen. Still, some analysts remain optimistic about the stock’s outlook over the next 12 months, per Bloomberg, as quoted on Yahoo Finance. Morgan Stanley analysts including Meta Marshall maintained their overweight rating, “citing valuations, the company’s ability to build out the platform and opportunities outside of the US as reasons for remaining bullish,” the article noted.

Zoom-Heavy ETFs

If you want to follow Cathie Wood and some Morgan Stanley analysts, you may buy the dip the Zoom shares. Investors can also consider basket approach as this lowers the company-specific concentration risks. Let’s highlight some Zoom-heavy ETFs.

ARK Innovation ETF ARKK – Zoom has about 8.42% Weight

ARK Next Generation Internet ETF ARKW – Zoom has about 7.46% Weight

Global X Education ETF EDUT – Zoom has about 4.85% Weight 

Global X Cloud Computing ETF CLOU – Zoom has about 4.22% Weight

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.