Zoom Communications Shares Fly Higher. Where Next for Investors?

September 1, 2020

Zoom Video stock

Video-conferencing specialist Zoom Video Communications Inc (NASDAQ: ZM) saw its shares hit an all-time high, up 8.6% just before it released its latest quarterly earnings.

Reporting earnings after the market closed, the company didn’t disappoint. Zoom absolutely crushed expectations with fiscal second-quarter 2021 revenue leaping 355% year-on-year to US$663.5 million, versus expectations of US$500 million.

After-hours trading saw Zoom shares trade up a further 20%.

Tim’s Take:

“One of the best quarters in software history”. That was what one analyst said after Zoom’s Q1 report. Scratch that. After last night’s Q2 earnings, investors are going to need to come up with new superlatives to describe the numbers Zoom just posted.

Management raising guidance after beating expectations so easily was the cherry on top. CEO and founder Eric Yuan and his team have been notoriously conservative in the past in terms of future guidance.

Given that, I think it’s a massive indicator of their confidence that they’ve raised full-year revenue guidance to US$2.39 billion from its previously-projected US$1.8 billion.

Zoom has been one of the biggest beneficiaries of the stay-at-home trend and I think this is likely to continue. 

Offering individuals and companies a video-conferencing tool that is seamless, the company is now even profitable on a GAAP basis and it’s boasting a net dollar expansion rate of 130%. That means existing customers are spending more money with it as time goes on. 

Even if a partial return to the office occurs after the pandemic, I think Zoom has proven beyond doubt that it’s an invaluable communications tool for both individuals and companies alike.

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Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.

He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.

In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.

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