Zoom (ZM) Is a Winner, but the Stock Is Fairly Valued Here

And just like that, video conferencing stalwart Zoom (ZM) delivered a total knockout. The company released earnings results for fiscal Q1 2021 on Tuesday, and according to BTIG analyst Matthew VanVliet, the only fitting response is a yelped, “Holy Cow!!!”

It is no secret Zoom has made the most of the COVID-19-induced stay-at-home environment, instantly turning from a niche offering to a consumer staple product. The market has given it a round of applause too, sending shares up by 209% so far this year.

However, no one expected the company to see this level of success during its most recent quarter.

Digging a bit deeper into the numbers, revenue came in at $328 million, indicating year-over-year growth of 169% while obliterating the Street’s call for $203.5 million. As evidence of how businesses have made use of Zoom during the pandemic, in the quarter, customers with more than 11 employees increased by 354%. The number of clients bringing over $100,000 in TTM revenue was up by 90% from the same period a year ago. Add to the list adjusted net income that hit $58.3 million, amounting to $0.20 per share and leaving last year’s $8.9 million, or $0.03 per share, in the dust.

That being said, looking ahead, the platform is projecting even more astounding growth.

For Q2, the Street projects $222.4 million in revenue and EPS of $0.11, yet Zoom expects revenue of between $495 million to $500 million and EPS to land between $0.44 and $0.46.

Vliet is impressed, to say the least, “We are left slightly in awe of the magnitude of the outperformance from Zoom even amid all of the tailwinds currently in the market for a video collaboration platform that “just works.” We have seen that Zoom has become verb, noun, and adjective for all things video in the COVID-19 lexicon as the product supported so much more than Work-From-Home and has emerged as a ubiquitous platform for all types of interactions around the world – be it social, educational, or work-related.”

However, Zoom has outperformed to such an extent that the BTIG analyst’s glowing review comes with a Neutral rating. Vliet has no price target in mind. (To watch Vliet’s track record, click here)

All in all, Zoom is receiving mixed signals from the rest of the Street. Based on 10 Buys, 11 Holds and 2 Sells, the video collab tool has a Moderate Buy consensus rating. In addition, the average price target of $194.33 indicates downside potential of 13%. (See Zoom stock analysis on TipRanks)

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