Furthermore, the gross margin is expected to be approximately 80% for the entire year, and operating income in the range of $1.74 billion to $1.745 billion, representing an operating margin of approximately 39%. Finally, this results in an EPS estimate of $4.93 to $4.95, up 13% and far above my $4.20 estimate from the start of the year. For the first quarter, Zoom is guiding for sales to come in at roughly $1.13 billion. Management’s revenue target for the period was roughly in line with the average Wall Street analyst target, but its profit target beat expectations.

  1. These expectations result in the following financial projections.
  2. Furthermore, I still don’t view shares as trading at a discount in any way, as the growth outlook remains somewhat depressed and risks remain significant, even as the company has shown some positive and surprising developments in recent quarters.
  3. Zoom Phone, a cloud-calling product rolled out in 2019, lets customers set up group internet phone calls without video.
  4. For most meeting requirements, both will probably do the job, and as a result, Zoom has seen its moat disappear rapidly over recent years.

Yet, I did not expect Zoom to be able to fully benefit from this growth. I still don’t, which is essentially a result of the significant competition it faces from Microsoft with its Teams platform, Zoom’s weak moat, and its financial disadvantage. In addition to better-than-expected Q4 performance and forward guidance, Zoom also announced a substantial stock repurchasing initiative. The company announced that its board of directors had approved up to $1.5 billion in new stock buybacks. The move likely signals that the board believes that shares are undervalued, and the repurchasing initiative should increase the company’s earnings per share.

Zoom Stock: Is It A Buy Right Now?

Furthermore, despite my overall negative view so far, Zoom has also positively surprised me over the last eight months in terms of feature developments and the integration of AI functionalities in particular. In my April article, I explained how I expected Zoom to fall behind the competition on this front as it has to compete with big tech peers like Cisco and Microsoft with superior financial resources and much more experience in AI. And yet, Zoom has proven me wrong over https://www.forexbox.info/what-is-dowmarkets-and-how-to-use-it/ these last few months, with the company rapidly rolling out new features and beating Microsoft and Cisco to the feat. On a positive note, Zoom has surprised observers with its rapid deployment of AI functionalities, outpacing competitors like Cisco (CSCO) and Microsoft. The company’s investments in AI, notably through the partnership with Anthropic, have led to the successful integration of AI features like the Zoom AI companion, Zoom Phone, and Zoom Contact Center.

Paid Zoom business plans cost $15 or $20 per employee and require minimums of 10 or 50 seats. Zoom puts limits on the number of participants in a group call and the length of meetings. Zoom software gets high ratings for ease of use and simplicity following earlier video services that provided jerky images and out-of-sync audio.

Rather than increase revenue, Zoom Video expects gen AI tools to retain and add customers. Outside of making notes within the Zoom platform, I don’t think so. Microsoft Office and Google Docs have very strong user bases with great compatibility and accessibility https://www.forex-world.net/blog/what-is-uniswap-uniswap-a-unique-exchange-uniswap/ with other apps and platforms of those companies. Furthermore, while hard to determine, some analysts believe Teams is about to reach $8 billion in revenue in 2023. This is up from $6.8 billion in 2020, when, of course, usage was much higher.

For fiscal 2025, Zoom said it expects earnings of $4.86 per share at the midpoint of its outlook vs. estimates of $4.66 per share. The company said it expects revenue of roughly $4.6 billion vs. estimates of $4.637 billion. In the enterprise market for business customers, revenue rose 5% to $667.3 million, topping estimates of $658 million. Zoom’s latest fiscal year (FY) was FY 2021, which ended Jan. 31, 2021.

The company expects adjusted earnings per share for the period to be between $1.18 and $1.20, coming in significantly ahead of the average analyst estimate’s previous call for per-share earnings of $1.15. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature.

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The company seems to have entered a mature stage in which growth is expected to remain in the mid-single digits and management should focus on profitability and its shareholders. Yet, the company reported SBC expenses of $1.3 billion in FY23, resulting in it only barely making a GAAP profit. It has been a while since I last covered Zoom, the company behind one of the world’s largest videoconferencing platforms, here on Seeking Alpha. I last discussed the stock in April when I rated shares a sell and not without reason.

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We do this to reflect that growth tends to slow more in the early years than it does in later years. Zoom emerged as one of the winners of the COVID-19 pandemic as its share price skyrocketed to over $500 per share. Today, the share price has come down to around $70 per share as investors realized that the COVID-19 tailwinds boosting growth for Zoom were not here to stay, resulting in a somewhat weak growth outlook for the company. And this is reflected in its FY23 results and FY24 outlook with growth of just 7% and 1%, respectively.

This is what has so far allowed Zoom to avoid reporting negative growth. Both consumers and enterprises continue to see value in the company’s offering as remote working remains popular. Zoom even initiated new growth efforts, building out an artificial intelligence (AI)-driven communications ecosystem. Then there is the endorsement of Ark Investment Management’s CEO Cathie Wood, whose bold predictions regarding other tech stocks (like Tesla and Bitcoin) have come to pass. Wood and her team predicted a $1,500-per-share price target for Zoom by 2026, a 22-fold gain from current levels. Share repurchases are tremendously effective at creating shareholder value when the stock is cheap.

The gross margin in Q3 was 79.7%, up 20 basis points YoY and slightly below the level achieved in the first half of the year. Still, considering weakness, this is a strong gross margin performance. Clearly, Zoom customers are eager to adopt the new functionalities, adding to Zoom’s value per customer, which can become a strong growth driver over time, especially if it continues to struggle to add new customers. The company’s AI companion, which is now available to paying users at no additional cost, is a differentiator to other AI assistants, with those of Microsoft and Google, both costing up to $30 per month. As a result, the AI functionalities have seen great adoption in the first three months since the release, with over 200,000 accounts enabling it and 2.8 million meeting summaries having been created by the assistant.

As mentioned above, on Sept. 30, 2021, Five9 announced that the two parties had mutually agreed to abandon the deal. The company said that the agreement had not received the required number of votes from Five9 shareholders to approve the merger. Earlier in September, The Wall Street Journal reported that a U.S. Department of Justice-led panel, named Team Telecom, was investigating the proposed merger’s potential national security risks. Zoom has invested in AI start-up Anthropic in an effort to boost its AI offerings.

Admittedly, the company’s results have come nowhere close to matching that expected growth. In the first nine months of 2023, revenue of $3.4 billion increased by only 3% yearly. Still, the bear estimate calls for a $700-per-share or less stock price, amounting to more than a 10-fold gain from current levels if that price target holds. Digging through machine learning and artificial intelligence Zoom’s fourth-quarter earnings yielded some surprises. Although the company still must find a way to get top-line growth going again, the stock offers investors a lot of potential upside at this bargain-basement price. Zoom Video reported January-quarter earnings and revenue that topped estimates and announced a $1.5 billion buyback of its own shares.

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