Zoom Video Communications shares spiked 23% in the extended market session after the popular video-conferencing platform blew past quarterly estimates and raised its annual sales guidance.
Zoom (ZM) shares jumped to $399.02 in Monday’s late-market trading after advancing 8.6% at the close. Total sales exploded 355% to $663.5 million in the fiscal second quarter year-on-year, exceeding analysts’ expectations of $500.5 million.
Net income attributable to common shareholders increased to $185.7 million, or 63 cents per share, from $5.5 million, or 2 cents per share, a year earlier. On an adjusted basis, Zoom earned 92 cents per share, more than double the analyst consensus of 45 cents.
The video-conferencing platform said that one of the main drivers of total revenue included the growth of new customers. In the reported quarter, the number of customers contributing more than $100,000 in trailing 12 months revenue, was up approximately 112% from the same quarter last fiscal year.
“Organizations are shifting from addressing their immediate business continuity needs to supporting a future of working anywhere, learning anywhere, and connecting anywhere on Zoom’s video-first platform,” said Zoom CEO Eric S. Yuan. “Our ability to keep people around the world connected, coupled with our strong execution, led to revenue growth of 355% year-over-year in Q2 and enabled us to increase our revenue outlook.”
Zoom said it forecasts annual revenue for fiscal year 2021 to be in a range of $2.37 billion to $2.39 billion, up from $1.78 billion to $1.80 billion previously. Total revenue for the third quarter is expected to be between $685 million and $690 million.
Zoom shares have ballooned 378% this year as the company benefited from a user boom when millions of users flocked to use its technology to host business and social meetings during the lockdown affecting many countries around the world. Following the sharp rally, the $243.17 average analyst price target now implies 25% downside potential.
Ahead of 2Q earnings, Stephens analyst Ryan MacWilliams reiterated a Hold rating on the stock with a $220 price target (32% downside potential), saying that he is awaiting a more reasonable valuation entry point before getting involved.
“We continue to believe Zoom will grow into its valuation through viral customer adoption, platform breadth expansion, and highly conservative Street estimates, which pave the way for a large magnitude of forward revenue revisions,” MacWilliams wrote in a note to investors. “Zoom shares currently trade at a 33x CY21 EV-to-sales multiple, above the fast-growth SaaS peer group median multiple of 14.1x, though we expect Zoom’s multiple to continue to trend lower as elevated revenue growth surpasses beatable Street expectations.”
The rest of the Street has a cautiously optimistic outlook on the shares. The Moderate Buy analyst consensus breaks down into 12 Buy ratings, 8 Hold ratings and 2 Sell ratings. (See Zoom stock analysis on TipRanks)
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