Zoom Video Communications Inc Stock Soars on Coronavirus Fears

Zoom Video Communications Inc Stock Soars on Coronavirus FearsZoom Video Communications Up about 60% in 2020

The stock market continues to get routed on fears that the coronavirus (COVID-19) will stifle business activity and curb corporate earnings. U.S. equities are in correction territory and continue to look vulnerable to additional losses. Tumbling into bear-market territory is not out of the question.

That said, there are a number of tech stocks that have done well in light of the coronavirus epidemic. One of them is Zoom Video Communications Inc (NASDAQ:ZM).

Unlike the broader market, which has been taking a massive hit from the COVID-19 fears, Zoom Communications has been attracting investor interest. Even when the virus is contained, there will be reason to remain bullish on Zoom Video. The company reported strong third-quarter results and an encouraging outlook.

ZM Stock Overview

Zoom Video Communications provides a video communications platform that allows employees to connect with each other anywhere. That’s perfect for those who work remotely or in isolation.

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The company’s easy-to-use cloud platform allows for video meetings, voice conversations, webinars, and chats across any communication device, such as desktop computers, mobile devices, phones, and conference room systems.

The company’s customers are located primarily in the Americas, Europe, Asia-Pacific, the Middle East, and Africa.

Zoom Video Stock Information

Market Cap $21.8 Billion
52-Week High $121.98
52-Week Low $59.94
Shares Outstanding 111.8 Million
Float 101.4 Million
50-Day Moving Average $85.63
200-Day Moving Average $77.57

(Source: “Zoom Video Communications, Inc. (ZM),” Yahoo! Finance, last accessed February 28, 2020.)

Another Strong Quarter

On December 5, Zoom Video announced that revenue for its third quarter of fiscal 2020 (ended October 31, 2019) increased 85% year-over-year to $166.6 million. (Source: “Zoom Video Communications Reports Third Quarter Results for Fiscal Year 2020,” Zoom Video Communications Inc, December 5, 2019.)

The company reported a loss from operations of $1.7 million, compared to $1.1 million in the third quarter of fiscal 2019. Adjusted income from operations for the third quarter of fiscal 2020 was $21.3 million, up significantly from $1.6 million in the third quarter of fiscal 2019.

Zoom Video reported third-quarter 2020 net income of $2.2 million ($0.01 per share), compared to a net loss of $0.6 million ($0.01 per share) in the same period in the previous year.

Zoom Video ended the quarter with total cash, cash equivalents, and marketable securities of $811.4 million.

At the end of the third quarter, Zoom Video had about 74,100 customers with more than 10 employees, up approximately 67% year-over-year. It also had 546 customers adding more than $100,000 in trailing 12-month revenue, a 97% increase year-over-year.

“Our third quarter was another strong performance for Zoom. Our execution helped drive revenue growth of 85% with increased non-[generally accepted accounting principles] profitability year-over-year and free cash flow of $54.7 million,” said Eric S. Yuan, founder and CEO.

“This execution also drove 67% growth in the number of customers with more than 10 employees and 97% growth of in the number of customers contributing more than $100K of [trailing 12-month] revenue.”

Business Outlook

For the fourth quarter of fiscal 2020 (ended January 31), Zoom expects to report total revenue between $175.0 million and $176.0 million, and adjusted income from operations between $17.0 million and $18.0 million. Fourth-quarter adjusted earnings per share are expected to be about $0.07.

For full-year 2020, total revenue is forecast to be between $609.0 and $610.0 million, with adjusted income from operations to be between $67.0 million and $68.0 million. Full-year adjusted earnings per share are expected to be approximately $0.27.

Zoom Video will be releasing its financial results for the fourth quarter and fiscal 2020 on March 4 after the market closes.


Chart courtesy of StockCharts.com

ZM stock was on a tear in the months immediately after it went public. That momentum came to an end in the second half of 2019.

It has been a different story in 2020. Fears over the coronavirus, which first came to public attention in early January, has sent Zoom Video stock soaring.

ZM stock is currently up approximately 60% year-to-date. Chances are good that Zoom Video’s share price will experience a pullback on short-term profit taking. But thanks to a solid outlook, its long-term outlook remains bright.

Analyst Take

As explained earlier, Zoom Video stock has been bullish in 2020. That strong growth has been fueled by growing concerns about the global spread of the coronavirus. Even when the virus is finally contained, ZM will continue to be a great tech stock.

Zoom Video Communications Inc reported strong third-quarter results and has a solid outlook. Furthermore, the spread of COVID-19 has drawn attention to just how important cloud communication companies like Zoom Video are.