Shares of Zoom Video (ZM) are on the rise on Wednesday after the company reported revenue growth of 169% from the previous year and more than doubled its revenue guidance for the fiscal year amid the COVID-19 pandemic that forced many to work from home. Calling it a "historic" quarter, RBC Capital analyst Alex Zukin upgraded Zoom to Outperform, while his peer at DA Davidson raised his rating on the name to Buy, citing the company's "huge acceleration in growth." Raising their price targets on the shares, both JPMorgan analyst Sterling Auty and Needham analyst Richard Valera said they had not seen performance on this scale in their 20 years of tech coverage. Meanwhile, Stifel analyst Tom Roderick told investors that this was "easily the most stunningly positive quarter" that he can recall in 18 years on the sell side.
RESULTS: Zoom Video reported first quarter earnings per share of 20c and revenue of $328.2M, both above consensus of 9c and $202.48M, respectively. The company also said that the number of customers contributing more than $100,000 in trailing twelve months revenue is up 90% year-over-year. Additionally, Zoom said it sees second quarter earnings per share between 44c-46c, with consensus at 11c, and revenue between $495M-$500M, with consensus at $223.32M. For fiscal year 2021, the company sees earnings per share of $1.21-$1.29, with consensus at 45c, and revenue between $1.775B-1.8B, with consensus at $934M.
"The COVID-19 crisis has driven higher demand for distributed, face-to-face interactions and collaboration using Zoom. Use cases have grown rapidly as people integrated Zoom into their work, learning, and personal lives," said Eric Yuan, Founder and Chief Executive Officer of Zoom along with the company's quarterly press release.
'HISTORIC' QUARTER: RBC Capital analyst Alex Zukin upgraded Zoom Video to Outperform from Sector Perform with a price target of $250, up from $125, following the company's "beat and raise" in a "historic" quarter. Despite the current valuation of 26-times expected 2021 revenue, the analyst expects further upside and continuous high growth over the coming years, with Zoom Phone representing a significant total addressable market expansion opportunity. Zukin told investors that management's assumptions are significantly more conservative than usual.
Meanwhile, DA Davidson analyst Rishi Jaluria also upgraded Zoom Video to Buy from Neutral with a price target of $240, up from $150, following the company's "huge acceleration in growth" reported with its first quarter results. The analyst noted that the debate over the sustainability of the positive trends will continue, but contended that the benefits from "irreversible changes" - particularly increased remote work - are here to stay. Jaluria added that Zoom Video still trades at a discount relative to companies like Coupa Software (COUP), Okta (OKTA), Shopify (SHOP), and Datadog (DDOG).
FBN Securities analyst Shebly Seyrafi also upgraded Zoom Video to Outperform from Sector Perform with a $250 price target following the earnings report.
'WOW': In a post-earnings research note titled simply "Wow," JPMorgan analyst Sterling Auty raised his price target on Zoom Video to $220 from $150, while keeping an Overweight rating on the shares. "This was the largest beat we have witnessed in covering software for over 20 years," Auty wrote to investors. The analyst noted that management is doing the right thing factoring into guidance significant churn from businesses with fewer than 10 employees and consumers that have come on to the Zoom platform during COVID-19. However, he believes "things have fundamentally changed" and use of video in a wider array of situations will continue to drive adoption from knowledge workers moving forward.
Also highlighting that he has not seen performance on this scale in his 20 years of tech coverage, Needham analyst Richard Valera raised the firm's price target on Zoom Video to $230 from $140 and maintained a Buy rating on the shares. The analyst noted that in the near-term, the stock will be driven by conflicting dynamics of a sharply increased churn relative to historical levels and the opportunity from a "lasting secular shift" toward remote work as well as its larger installed base for cross-sales of its Phone and Rooms service.
While keeping a Hold rating on the stock, Stifel analyst Tom Roderick raised the firm's price target on Zoom Video to $180 from $105 after what he said was "easily the most stunningly positive quarter" that he can recall in 18 years on the sell side. Calling it a “showstopping” quarter, Stephens analyst Ryan MacWilliams raised his price target on Zoom Video to $180 from $95 but also kept an Equal-Weight rating on the shares. The analyst believes the focus will now shift to the potential churn of paid consumer customers and thinks investor perception on churn as the economy reopens will present a headwind given where shares are trading from a valuation perspective.
Additionally, Cantor Fitzgerald, Bank of America, Citi, Piper Sander and Baird raised their price targets on Zoom's shares following the quarterly results.
PRICE ACTION: In morning trading, shares of Zoom have gained over 5% to $219.08.
Zoom Video
+11.26 (+5.41%)
Coupa Software
-7.48 (-3.26%)
Okta
-3.51 (-1.76%)
Shopify
-12.98 (-1.67%)
Datadog
+0.56 (+0.79%)