5/24/2023: Zoom Earnings Beat Expectations

Zoom reported quarterly earnings this past Monday after market close. Revenue was $1.1B vs. $1.08B expected. Adjusted EPS was $1.16 vs. $0.99 expected. The company also raised the whole year revenue guidance to $4.465B- $4.485B vs. $4.435B- $4.455B forecasted. ZM 0.00 stock price, however, tanked ~10% in the past two trading sessions after the report.

Overall, it’s not a bad quarter. The revenue actually increased YoY and they generated ~$400M of free cash flow. Zoom’s current market cap is $18.6B and the company has $5.6B of cash/cash equivalent on their balance sheet. In other words, Zoom’s Enterprise Value to Revenue ratio is ~3. However, Zoom spent $282M or ~25% of its revenue on stock based compensation, which is bonkers. I do think the push for efficiency, the normalization of tech compensation and the productivity white collar workers gain from AI is going to make the overall expenses lower for Zoom. I personally think Zoom’s stock valuation is quite attractive. I have been a shareholder and I do plan to add onto my positions at the current level. People are still using Zoom and a lot of interesting AI features can be built on top of its core product. There are some short-term challenges such as people switching to the free plan due to a slowing economy. But I am long-term bullish on the company as it’s an essential product that I believe will stick around and be a core communication tool for most workers. 

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Disclaimer: The content above is only the author's opinion which does not represent any position of Followin, and is not intended as, and shall not be understood or construed as, investment advice from Followin.
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