Zoom Vid Commu Rg-Ahas been one of the “pandemic actions” that has survived after the advances in vaccines and the end of the global quarantine. But the market no longer looks favorably on companies in “investment mode” and the signature must curb free use of its services, according Dan Gallagher in The Wall Street Journal.
Zoom shares hit their all-time high in the middle of October 2020just a few weeks before the news of the first advance of the vaccine help the world see End of incessant video conferences and awkward happy hours. Stocks have been in a mostly downward spiral ever since, even as price spikes Delta and Omicron they pushed the reopening of the offices.
Zoom has lost more than three-quarters of its market value since its peak, and the multiple of shares has passed from 55 times future sales to about eight times in that period.
That would seem to create an easy setup for the fiscal fourth quarter results of the company that will be published next Monday afternoon. Zoom also seems to have set the bar pretty low, projecting that revenue grew just 19% year over year to about $1.05 billion for the quarter ending January 31. The sales would be more than five times what the company managed in the same quarter two years ago, before the start of the pandemic, although it would also be the slowest growth on record.
But many analysts are still worried.Tyler Radke of Citigroup wrote on Wednesday about the “increasing competitive pressure”, particularly of microsoftwhich competes directly with Zoom through its team platform. Karl Keirstead of UBS echoed a similar sentiment on Thursday, noting that Microsoft Teams is “winning more and more business in the business side“.
Increasing competition from such a wealthy rival will force Zoom to accelerate spending on both sales and research and development. The firm spent more than half of their income on sales and marketing expenses before the pandemic. Explosive growth since then has skewed that ratio to an average of 27% in the last seven quarters. The Zoom CFO Kelly Steckelbergalso said earlier that the company intends to increase your spending on R&Dwhich lately averaged only 8% of income.
The result is that the Zoom Adjusted Operating Marginwhich is expected to reach around 39% for the fiscal year ending in January, probably decrease. Steckelberg told a UBS investment conference in December that investors “should expect a continued contraction in our margins on a quarterly basis for at least the next year and maybe even into the future.”
Invest in driving sales and future opportunities This is to be expected for a company with a brand that is now very well known and still has a lot of growth potential. Gartner estimates that the current market for “unified communications” is located in almost 45 billion dollars a yearmore than 10 times Zoom’s annual revenue.
But lately, investors have taken a dim view of cloud companies in general and, in particular, those who enter the investment mode at a time when the sales are also slowing down. That puts Zoom in a tough spot, as some analysts believe wall street expectations of a revenue growth of 15% to 16% in the current fiscal year are too high. Charles Rogers of M Science says that trends monitored during the fourth quarter suggest that a range of 10% to 11% It would be more realistic.
That might reset expectations to a more beatable level, but it would also fall short of the “absolutely clean impressions” that Morgan Stanley software analysts They say cloud companies are needed in today’s market environment.
Zoom Vid Commu Rg-A closed the session on Friday below the moving average of 200 sessions, which clearly shows a downward trend in its shares.
