Zoom Could Offer Deep Dip Buying Opportunity

Zoom Video Communications Inc. (ZM) fell to a four-month low at the start of Monday’s U.S. session, continuing a painful slide that’s relinquished more than 35% of the stock’s value since October’s all-time high at 589. The transition out of COVID beneficiaries and into recovery plays accounts for part of the downside but that hasn’t stopped Peloton Interactive Inc. (PTON) and other pandemic winners from posting another round of all-time highs.

Zoom Long-Term Growth

The future still look bright for Zoom, with Bill Gates predicting that half of all business travel will disappear in coming years, in favor of the virtual meeting space. He also expects 30% of American employees to work from home on a near-permanent basis, supporting long-term growth for Zoom’s rapidly growing suite of products. Given the mix of catalysts in play, it looks like over-valuation and overbought readings are responsible for most of the downside.

The company is aggressively pursuing new revenue streams to diversify its primary business model, with recent reports it was exploring entry into e-mail and calendar services. It’s also just expanded into Singapore, opening a new research and development center. However, reports on both activities have triggered sell-the-news reactions, reflecting growing nervousness by shareholders worried the uptrend has come to an end.

Wall Street and Technical Outlook

Wall Street has grown increasingly cautious about Zoom’s long-term outlook, dropping to a ‘Moderate Buy’ rating based upon 11 ‘Buy’ and 12 ‘Hold’ recommendations. One analyst now recommends that shareholders close positions and move to the sidelines. Price targets currently range from a low of $340 to a Street-high $600 while the stock is trading just $20 above the low target. This humble placement raises odds the two-month correction has entered its final phase.

The decline is nearing the 200-day moving average for the first time since a February breakout. In addition, that level has narrowly aligned with the bottom of Sept. 1’s unfilled gap between 326 and 440, setting up a high odds reversal zone that could end the correction. Accumulation readings have remained rock-solid throughout the selloff, providing the ample supply of committed buyers needed for a high percentage bounce into the 450 to 500 zone.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Zoom Earnings Beat Wall Street Estimates But Shares Dip 5% After Hours on Disappointing Margins

Zoom, a cloud video communications provider, reported better-than-expected earnings in the third quarter of the fiscal year 2021 with a revenue surge of over 365% and forecasts total revenue between $2.575-$2.580 billion in the full fiscal year.

But shares traded down 5% in the aftermarket, partially on gross margins that were light of consensus and down sequentially, driven by the high volume of free users and higher public cloud usage. Zoom’ shares closed 1.43% higher at $478.36 on Monday; the stock is up over 600% so far this year.

The company said its revenue climbed 367% to $777.2 million in the third quarter ended October 31, beating the Wall Street consensus estimate of around $694 million. Adjusted earnings came in at 99 cents per share, also beating market expectations of 76 cents per share.

Zoom forecasts revenue between $806-$811 million in the fourth quarter, above estimates of $730.1 million and non-GAAP income from operations between $243.0 million and $248.0 million. Non-GAAP diluted EPS is expected to be between $0.77 and $0.79 with nearly 306 million non-GAAP weighted average shares outstanding.

“Zoom (ZM) reported a record F3Q21, but shares traded down 5% AMC on light gross margins (partly the result of more free users). We would be buyers on a sustained pullback, as the quarter was beyond impressive, with ZM scoring a 420 on a “Rule of 40” basis,” said Rishi N. Jaluria, Senior Research Analyst at D.A. Davidson & Company.

“In our view, the key debate is about the sustainability of ZM’s growth post-pandemic and we take the view that ZM will be increasingly necessary to enable a hybrid remote work strategy and that many of the changes in work brought on by the pandemic are irreversible in nature. We maintain our BUY rating and $600 price target on Zoom Video Communications,” N. Jaluria added.

Zoom Stock Price Forecast

Twenty equity analysts forecast the average price in 12 months at $486.33 with a high forecast of $611.00 and a low forecast of $315.00. The average price target represents a 1.67% increase from the last price of $478.36. From those 20 analysts, ten rated “Buy”, nine rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $380 with a high of $530 under a bull-case scenario and $250 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the video communications provider’s stock.

“We are rolling forward our price target a year as the year comes to a close. As a result, our price target increases to $380 from $350, which represents 29x EV/FY23e Revenue or 28x EV/discounted FY32e FCF. We believe that while COVID-19 keeps video conferencing as a critical piece of employee connectivity, valuation is likely to remain closer to our bull case,” said Meta Marshall, equity analyst at Morgan Stanley.

“Our bull case moves to $530 from $500 and represents 31x EV/FY23e Rev or 29x EV/discounted FY32e FCF. Our bear case also increases to $250 from $210, which represents 19x EV/FY23e Revenue or 27x EV/discounted FY32e FCF. Risks to valuation remain macro headwinds, competitive efforts, COVID-19 vaccine causes a return to work/school.”

Several other analysts have also upgraded their stock outlook. Citigroup raised their stock price forecast to $467 from $377; RBC lowered the price target to $550 from $600; Credit Suisse upped their target price to $340 from $315; JP Morgan raised the target price to $450 from $425; Bernstein increased their target price to $611 from $228 and D.A. Davidson increased their target price to $600 from $460.

Analyst Comments

“Zoom eliminates barriers to video conferencing growth. Company has meaningful competitive moat built on more than just architecture. Leveraging position with customers to be center of UC platform. WFH has permanence but diminishes post-COVID-19. Valuation credits significant expansion opportunities in broader unified communications landscape, supported by initial Phone execution,” Morgan Stanley’s Marshall added.

Upside and Downside Risks

Risks to Upside: 1) Zoom Phone adopted faster than expected. 2) Sales efficiency matches previous levels. 3) International business shows continued leverage. 4) Topline beats to flow to bottom line WFH permanence. 5) K-12 Market – highlighted by Morgan Stanley.

Risks to Downside: 1) Macro conditions suffer. 2) Large competitor refreshes portfolio and gets aggressive on the price. 3) WFH wanes post COVID-19. 4) China / K-12 opportunity not monetizable.

Check out FX Empire’s earnings calendar

Earnings to Watch Next Week: Zoom, Salesforce.com and Splunk in Focus

Following is a list of company earnings scheduled for release November 30-December 4, along with earnings previews for select companies.

Earnings Calendar For The Week Of November 30

Monday (November 30)

IN THE SPOTLIGHT: ZOOM VIDEO COMMUNICATIONS

Zoom, a cloud video communications provider, is expected to report a profit of $0.57 in the third quarter lower than Q2’s $0.92 as the company is nearing the end of their growth cycle. Zoom’s shares closed 6.28% higher at $471.28 on Friday; the stock is up over 600% so far this year.

“Recent selloff makes some rebound on print more likely as current conditions have not changed. While a vaccine does change the outlook for how many employees will be working from home by the end of 2021, it doesn’t change the fact that in 2020, most employees remain at home (at least for a good portion of the week). While we are cautious on the achievability of long-term growth assumptions built into Zoom’s valuation, we are cognizant that the recent move discounts Zoom’s ability to post a meaningful beat in FQ3,” said Meta Marshall, equity analyst at Morgan Stanley.

“Our expectations for FQ3 and FY21 non-GAAP revenue / EPS are $688.1 million / $0.75 and $2.4 billion / $2.44, respectively. Our revenue forecasts imply 313% Y/Y growth in FQ3 (4% sequentially) and 283% growth for FY21, with quarterly, adds slowing meaningfully in our assumptions from the 102% Q/Q increase in FQ2. In general, we would view our estimates as conservative given churn rates should still be low and ability to sign new customers or expand deployments should be high. We believe a 9% beat is reasonable, at ~$750 million revenue (up 350% Y/Y) and implying 2 million net adds. Given last quarter’s Y/Y growth of 355%, we would note that continued acceleration is possible, which would cause a bigger correction in the name. With the 20% selloff since the peak, we continue to think there could be a correction this print,” Morgan Stanley’s Marshall added.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 30

Ticker Company EPS Forecast
NJR New Jersey Resources $0.57
ADNT Adient PLC $0.68
MNTA Momenta Pharmaceuticals -$0.46
ATHM Autohome $6.40
WB Weibo $0.60
BMA Banco Macro $1.30
IMMU Immunomedics -$0.29
EC Ecopetrol $0.15
VIST Vista Oil Gas -$0.19
GPFOY Financiero Inbursa ADR $0.09
MSNFY Minera Frisco ADR $0.05
GCTAY Siemens Gamesa ADR $0.01
AEG Aegon $0.27
TLK Telekomunikasi Indns Tbk Prshn Pp Pt $0.40
WF Woori Bank $1.57

 

Tuesday (December 1)

IN THE SPOTLIGHT: SALESFORCE.COM

Salesforce.com, an American cloud-based software company headquartered in San Francisco, is expected to report a $0.75 profit in the third quarter with more than 16% growth in revenue to over $5 billion. Salesforce.com’s shares closed 0.32% higher at $247.63 on Friday; the stock is up over 50% so far this year.

“Salesforce is benefiting from a robust demand environment as customers are undergoing a major digital transformation. The rapid adoption of its cloud-based solutions is driving demand for its products. Salesforce’s sustained focus on introducing more aligned products as per customer needs is driving it stop-line. Continued deal wins in the international market is another growth driver,” equity analysts at Zacks Research noted.

“Furthermore, the recent acquisition of Tableau positions the company to be a leader in business analytics for actionable results in everything from operations to HR. The stock has outperformed the industry in the past year. However, stiff competition from Oracle and Microsoft is a concern. Besides, unfavourable currency fluctuations along with increasing investments in international expansions and data centers are an overhang on near-term profitability.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 1

Ticker Company EPS Forecast
JKS JinkoSolar Holding Co. Ltd. ADR $0.85
BMO Bank Of Montreal USA $1.46
BNS Scotiabank $0.93
NTAP NetApp $0.73
TCOM Trip.com Group Ltd $1.02
VEEV Veeva Systems $0.68
HPE Hewlett Packard $0.34
BOX BOX $0.14
JRONY Jeronimo Martins $0.45
HOCPY Hoya Corp $0.74
AVAV AeroVironment $0.30

 

Wednesday (December 2)

IN THE SPOTLIGHT: SPLUNK

Splunk, the market leader in analyzing machine data, is expected to report a $0.09 profit in Q3 for the first time in the last three quarters with cloud revenue growth of over 85%. Splunk’s shares closed 2.6% higher at $204.03 on Friday; the stock is up over 35% so far this year.

“Our partner checks show weaker performance vs. last quarter & our gov’t checks also imply weaker growth on tough comps. Combined w/ some GTM changes under new sales leadership & pivot towards Observability & we see a lot of moving parts. We do see the upside to margins & 4Q pipelines sound good, but we feel top-line bookings could be more volatile Q-to-Q. Maintain Market Perform,” said J. Derrick Wood, equity analyst at Cowen and Company.

“For 3Q, we model -27% license growth, cloud growth at 87%, total revenue growth at -1% and ARR growth at 48%. We estimate normalized product bookings growth (ex-perpetual) in the high-teens for 3Q. For 4Q, we model -29% license growth, cloud growth of 86%, total revenue growth of -6% (Street -2%) and ARR growth of 45%,” Derrick Wood added.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 2

Ticker Company EPS Forecast
RY Royal Bank Of Canada $1.55
PDCO Patterson Companies $0.38
SNOW Intrawest Resorts -$0.38
CRWD CrowdStrike Holdings Inc. Cl A -$0.15
FIVE Five Below $0.20
SNPS Synopsys $1.56
SMTC Semtech $0.46
PVH PVH $0.18
RH Restoration Hardware $5.31
VRNT Verint Systems $0.60

 

Thursday (December 3)

IN THE SPOTLIGHT: DOLLAR GENERAL, KROGER AND ULTA BEAUTY

Ticker Company EPS Forecast
DG Dollar General $1.98
CM Canadian Imperial Bank Of Commerce USA $1.92
TD Toronto-Dominion Bank $0.97
KR Kroger $0.66
DCI Donaldson $0.45
ULTA Ulta Salon Cosmetics Fragrance $1.44
SAIC Science Applications International $1.53
COO Cooper Companies $3.09
MRVL Marvell Technology $0.25
OLLI Ollies Bargain Outlet Holdings Inc $0.58
CLDR Cloudera Inc. -$0.04
DOCU DocuSign Inc. -$0.23
YEXT Yext Inc. -$0.22
MDLA Medallia, Inc. -$0.18
PD PagerDuty Inc. -$0.20
FIZZ National Beverage $0.93

 

Friday (December 4)

No major earnings scheduled for release.

Zoom Heads Lower After Moderna News

Zoom Video Communications Inc. (ZM) resumed an aggressive decline in Monday’s U.S. session, dropping more than 25 points to 377, after Moderna Inc. (MRNA) reported 94% efficacy in its vaccine candidate. The stock bounced about 11 points below that price level last week after selling off more than 200 points and 37% in just 17 trading days. Overbought technical readings triggered the first part of the furious downdraft while Pfizer Inc.’s (PFE) blockbuster vaccine news prompted the second.

Zoom Enters Steep Correction

The COVID-19 beneficiary posted a 2020 return in excess of 850% into the Oct. 19 all-time high at 588, underpinned by its wildly popular Zoom virtual meeting software. However, market players are now turning their attention to a post-pandemic world that permits more human interaction, both in the work place and between family and friends. And, despite more than 200 points of downside, the stock’s price-to earnings ratio (P/E) still stands at an astronomical 482.

Zoom just took a big step in alleviating a series of security and privacy concerns that arose in the first quarter when the software first gained popularity, settling a Federal Trade Commission (FTC) complaint that requires the company to “implement a robust information security program to settle allegations that the video conferencing provider engaged in a series of deceptive and unfair practices that undermined the security of its users”.

Wall Street And Technical Outlook

Wall Street has been quiet as a church mouse since the selloff began in October, issuing no tier one upgrades or downgrades. Consensus now stands at a cautious ‘Moderate Buy’ rating, based upon 12 ‘Buy’, 12 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets finally match reality after the downdraft, with a low of $315 and a Street-high $611, while the stock is now trading about $90 below the median $478 target.

The stock pulled back to the 50-day moving average in early November and broke down last week, dropping to a 2-month low. Meanwhile, the Sept. 1 gap between 326 and 410 remains partially unfilled, with the bottom of the big hole marking a magnetic target and potential buying opportunity. The narrowly-aligned .786 Fibonacci rally retracement level and 200-day moving average near 310 could offer even lower risk entry for conservative market players.

For a look at all of today’s economic events, check out our economic calendar.

Pfizer Vaccine Breakthrough Boosts Markets

Pfizer And BioNTech Report Great Results From Their Large-Scale Study Of COVID-19 Vaccine

S&P 500 futures have recently received a major boost after Pfizer and BioNTech COVID-19 vaccine was found to be more than 90% effective in the first analysis of the large study.

Vaccine news provided significant support to stocks, and S&P 500 futures are gaining more than 4% in premarket trading. Not surprisingly, shares of vaccine developers are gaining a lot of ground ahead of the market open – Pfizer shares are up by 12% while BioNTech stock is up by more than 23%.

Meanwhile, WTI oil managed to return back above the $40 level as vaccine news increased hopes for a successful rebound of oil demand. At the same time, precious metals like gold and silver are under pressure as traders dump safe haven assets amid optimism about the vaccine.

Stay-At-Home Stocks Suffer On Vaccine News

While the vaccine news are positive for most stocks, shares of some companies are under major pressure in premarket trading.

Zoom and Peloton, which were one of the major winners during the pandemic, are down by almost 13%, and even Amazon is under pressure in premarket trading. As a result of the pressure on stay-at-home stocks, the tech-heavy Nasdaq is set to open higher by a modest 0.5%.

It remains to be seen whether vaccine news will trigger a real rotation from tech stocks into more cyclical stocks, but stay-at-home stocks will certainly have a very challenging trading session today.

Airline And Cruise Line Stocks Jump In Premarket Trading

Today, investors look ready to bet on beaten stocks like airlines and cruise lines. For example, American Airlines Group is up by 25% while Delta Air Lines  is gaining 18% in premarket trading.

Investors are even more optimistic about cruise lines like Carnival Corp. or Norwegian Cruise Line Holdings as an effective vaccine against COVID-19 may make the difference between bankruptcy and profitable business for these companies.

Traders should expect plenty of volatility in these stocks in the upcoming trading sessions as the market will try to find new price levels which take vaccine news into account.

For a look at all of today’s economic events, check out our economic calendar.

Zoom Video Communications Probing New High

Virtual meeting software provider Zoom Video Communications Inc. (ZM) exploded to the upside on the first trading day of September in reaction to a blowout Q2 2020 report, beating top and bottom line estimates by wide margins while raising Q3 guidance. The initial momentum wave stalled immediately near 480 but the stock withstood a week of aggressive profit-taking and has now mounted that level and traded above 500.

Zoom Rapid Growth

Zoom took off for the stars after millions around the world were told to stay at home in the first quarter to slow the spread of the COVID-19 pandemic. Their software has surged in usage since that time, becoming the most popular meeting application for businesses, social groups, and television hosts. Security issues undermined sentiment during the rally’s first wave but the Silicon Valley upstart has now cleaned out bugs and added protective layers to rebuild confidence.

Upgrades from BTIG Research and Goldman Sachs right after earnings intensified the upside but the failure of the SP-500 committee to add Zoom to the index a few days later added to aggressive selling pressure that stretched more than 130-points in a week. Most coverage has been neutral to bearish since that time, exposing the stock to profit-taking and short-term price action in the broad category of ‘COVID-19 beneficiary’.

Wall Street And Technical Outlook

Wall Street consensus has deteriorated since August, dropping to a ‘Moderate Buy’ rating based upon 10 ‘Buy’, 13 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $255 to a street-high $525 while the stock opened Tuesday’s U.S. session less than $50 below the high target. This placement, when taken together with lower ratings, could impede upside progress until the company’s next release in December.

Zoom held high above breakout support in early September and mounted the post-release high on Sept. 22, topping out at 529.74 one session later. The stock has been grinding sideways in a narrow consolidation pattern since that time, awaiting a catalyst that ends the stand-off. Selling pressure has increased in the last two weeks but oversold technical readings offer a slight edge to bulls, who could lift the stock toward 600 before a larger-scale correction kicks into gear.

For a look at all of today’s economic events, check out our economic calendar.

Zoom Video Shares Stream Higher After Knockout Earnings

Zoom Video Communications, Inc. (ZM) added 22.74% in after-hours trade Monday after the video conferencing company reported blowout quarterly results as people and businesses rushed to the platform to stay connected while staying closer to home during the pandemic.

The firm posted adjusted earnings of 92 cents per share on revenues of $663.52 million. Analysts had expected a profit of 45 cents a share and sales of $500.5 million. Moreover, top- and bottom-line growth increased by 355% and 1050%, respectively, from the year-ago period.

Management cited an accelerated shift to remote working, distance learning, and socializing for the better-than-expected quarter. “Organizations are shifting from addressing their immediate business continuity needs to supporting a future of working anywhere, learning anywhere, and connecting anywhere on Zoom’s video-first platform,” CEO Eric Yuan said in a statement cited by Barron’s.

As of Sept. 1, 2020, Zoom stock has a market capitalization of $91.71 billion and trades a whopping 378% higher on the year. In the past three months alone, the shares are up 80%. However, the stock comes with a lofty valuation, trading at over 200 times projected earnings.

Looking Ahead

The company substantially hiked its guidance for the current quarter, now expecting earnings per share (EPS) of 73- to 74 cents and revenues of $2.37 million to $2.39 million. It had previously forecast EPS of 35 cents on sales of $493 million.

Wall Street Outlook

Analysts remain bullish on Zoom Video stock on the back of more users signing up for paid plans after trialing a free account earlier in the pandemic. Research firms are also impressed with the company’s ability to grow its market share. “Zoom has captured the biggest portion of market share, increasing from 34% of total MAU’s back in March, to over 48% as of July 24th,” JP Morgan analysts wrote in a recent note to clients. The stock currently receives 11 ‘Buy’ ratings, 3 ‘Overweight’ ratings, 13 ‘Hold’ ratings, and 5 ‘Sell’ ratings.

Wall Street Outlook and Trading Tactics

While most stocks plunged to multiyear lows during the coronavirus sell-off, Zoom Video shares flipped previous resistance into support at the $105 level. Since then, the price has continued to trend sharply higher, with only minor pullbacks to the 50-day simple moving average (SMA). Given that the relative strength index (RSI) indicates short-term overbought conditions, traders should look to buy pullbacks to major support areas, namely at $280 and $175, rather than chasing recent gains.

Five Post-Covid Trends and Gold

The disruptions caused by the pandemic of Covid-19 forced people, companies, governments, and organizations to challenge their basis assumptions about their ways of life and conduct. Some of them might be trivial such as more frequent and thorough hand-washing, but others are much more important, amongst them putting more emphasis on health that came suddenly under threat and social relationships that were so missing during the quarantine. So, the key question is when the epidemic is fully contained, what will be the “new normal” – and how it will affect the gold market?

The first characteristic feature of the post-pandemic world will be more people working and getting things done from home. The digital transformation has already started before the coronavirus jumped on human beings, but the Covid-19 epidemic has accelerated its pace, with further expansion in videoconferencing, online teaching, e-commerce, telemedicine, and fintech. After all these long years, it turned out that all these boring meetings really could have been e-mails or chats via Zoom, Skype or Teams.

What does it mean for the economy and society? Well, working from home implies more flexibility and less commuting for the employees. So, they can work from any location and spend more time with their families. Improved work-life balance translates into happier workers, which can make them more productive. And the most important thing: people can work in sweatpants or pyjamas all day, hurray!

There are also benefits for the companies – just think about all the cost savings from less space needed and less business travels! Hence, although working from home has also some negatives (possible miscommunication, loneliness, and difficulties with unplugging after work, decreased knowledge flows and managerial oversight), it should increase productivity in the long-run, especially if not overdone. Improved productivity thanks to telework is positive for the corporate margins and equities, but it is bad news for the gold prices.

Second important trend is deglobalization. The pandemic showed that just-in-time supply chains relying on foreign suppliers are not resilient in times of global crises and border closures. So, many Western companies will re-shore some of their production, or reallocate it closer to their major markets in ways that favor national and regional supply chains. The growth of nationalism will counteract the first change and hamper the productivity growth, which is positive for the yellow metal. However, making the supply chains and manufacturing more resilient diminishes the long run threats to the economies and the risk of economic collapse, which could reduce the safe-haven demand for gold.

Third, the pandemic will affect the geopolitics. For example, it can aggravate the fragile trade relations between China and the United States. Moreover, the epidemic and the following economic crisis make more and more people question the liberal internationalism and America’s leadership role. On the contrary, China’s geopolitical role could increase in the aftermath of the pandemic. The rising geopolitical tensions and protectionism, as well as diminished confidence in the U.S. global leadership and the greenback could increase the appeal of gold.

Fourth, could be a shift toward lower population density and less crowded places. It may lead to a complete rethinking or redesigning of living in big cities – or a move from metropolises to smaller cities, towns or even to the villages. After all, when people need only Wi-Fi to work or educate, they don’t have to live in big cities anymore.

The consequences are not clear, but it’s possible that the real estate prices in the biggest cities could correct somewhat, as people and companies could cut costs and move away from high-priced, centrally located areas (however, there might be higher demand for larger houses with offices for telework). If we really see such a correction, the repercussions may be significant, also for the gold market, as the burst of the 2000s’ housing bubble demonstrated. As the chart below shows, the S&P/Case-Shiller U.S. National Home Price Index is now much higher than in 2007, before the global financial crisis started.

Last but not least, the role of governments will increase in the post-pandemic world after generously supporting companies and households during the crisis. Compared to the Great Recession, when both the Fed and the Treasury acted more gradually and with some fear of public anger, their recent actions were unprecedentedly swift and aggressive. Hence, the public debt will balloon all around the world, creating significant challenges, increasing the risk of sovereign-debt crisis and putting more downward pressure on the central banks to maintain the dovish monetary policy with ultra-low interest rates. This important macroeconomic trend should be positive for gold.

Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!

For a look at all of today’s economic events, check out our economic calendar.

Arkadiusz Sieron, PhD
Sunshine Profits: Analysis. Care. Profits.

 

Zoom Video Lifts To All-Time High Despite Mixed Commentary

Zoom Video Communications went ballistic in February when the pandemic triggered huge interest in their video conferencing software.  The easy-to-use interface fit perfectly with the need to conduct business and connect with family and friends during a tough period. In turn, this generated major Wall Street attention, triggering a flood of upgrades. A sense of normalcy returned in the second quarter but that didn’t stop the stock from breaking out after blowing away first quarter estimates on June 2.

Zoom Security Issues

Still, Zoom security holes have been well-documented, forcing many American and European businesses to switch to competitive offerings. The company has pledged to fix these flaws and recently opened discussions with Google to use their cybersecurity service. Public and government sales are also increasing, underpinned by Zoom for Government, which received Federal clearance in April 2109.

Analysts Divided On Prospects

Analyst rating consensus has grown more divided in the second quarter. This isn’t surprising, given the end of shutdowns in most parts of the world. The consensus currently features 11 ‘Buy’ recommendations and 10 ‘Hold” recommendations.  No analyst recommends selling the stock at this time.  Price targets range from $105.00 to $261.00, with a median $214 target. The stock is now trading less than 25 points under the high estimate, raising odds for downgrades.

Needham’s Richard Valera raised their target from $230 to $240 earlier this month, stating Zoom has “smashed its Q1 2021 print and guide – a performance unlike we’ve seen in 20+ years of tech coverage”. He tempered his enthusiasm, agreeing the company faces roadblocks that include “sharply increased churn relative to historic levels”. However, he expects headwinds to ease in 2022 and beyond, allowing a re-acceleration of net paid user growth.

Zoom Technical Outlook

The stock topped out just above 100 in June 2019 and sold off into the lower 60s in October. It resumed its uptrend in February 200, reaching the prior high a few weeks later. The subsequent breakout has added near 140 points in less than 4 months, highlighting intense momentum buying interest. Accumulation readings match bullish price action, making it easy for Zoom to gain additional points into the third quarter.