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Zoom Video (ZM) Q1 Earnings: What to Expect

Close-up of the Zoom Video logo
Credit: Andrei / stock.adobe.com

Video collaboration platform provider Zoom Video (ZM) is set to report first quarter fiscal 2021 earnings results after the closing bell Tuesday. Zoom shares have been punished considerably over the past six months, falling as much as 52% to a recent low of $273 since the stock reached its all-time high of $588.84 last October 19.

During that same span, the S&P 500 has risen some 15%. As coronavirus vaccines distribution accelerates, the market has grown concerned about Zoom’s ability to maintain its impressive growth rate while schools, universities and corporations reopen for in-person work and learn. The company, however, is reportedly looking to diversify its revenue stream by entering the contact center space. Among other things, Zoom is looking to build its own email and calendar platform to better compete with Microsoft’s (MSFT) Teams.

What’s more, Zoom last week launched its Events platform for virtual and hybrid events. The platform enables event organizers to create ticketed, live events for audiences of any size and charge admission fees. To reverse the trend in the share price, investors will want to hear positive progress on these growth initiatives which will likely come up on the conference call with analysts. And in addition to a top- and bottom line beat, Zoom will also have to issue a strong forecast, particularly given the positive news surrounding vaccines.

For the three months that ended April, Wall Street expects the San Jose, Calif.-based company to earn 99 cents per share on revenue of $906.03 million. This compares to the year-ago quarter when earnings came to 20 cents per share on revenue of $327.17 million. For the full year, ending January, earnings are projected to rise 12.5% year over year to $3.76 per share, while full-year revenue of $3.8 billion will rise 43.4% year over year.

The decline in the stock has been due to the decelerating growth rate. And much of that underscores how Zoom has been a victim of its own success. In 2020 the company’s full-year profits soared more than 700%, driven significantly by growth acceleration from the pandemic. But the market is forward-looking, and investors and analysts have begun to worry that Zoom won’t be able to duplicate its success. And that is not to mention the much tougher comps the company must overcome in the quarters ahead.

In other words, the quarters ahead won’t look as rosy as the quarters past. That skepticism was evident in the fourth quarter as the shares were punished despite the company beating on revenue and profits and lifting full-year guidance. Fourth quarter revenues soared 368.7% to $882.49 million. That growth rate was more than a full point faster that Q3's 367% growth. Zoom also reported Q4 adjusted EPS of $1.22 per share which beat Street estimates by 43 cents.

During the quarter, the number of customers contributing more than $100,000 in trailing twelve months revenue surged 156% year over year to 1,644, rising faster that the 136% growth in Q3. Customers with more than 10 employees — a key measure of growth — rose 470% to 467,100. This is impressive particularly given the increased competition Zoom endures from larger rivals such as Cisco (CSCO) and Microsoft. On Tuesday Zoom’s main task, aside from beating these numbers, is to convince a skeptical market that the company can pivot from a pandemic-induced boom and remain relevant.

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

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Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

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