Zoom Video Communication Inc. (NASDAQ: ZM) announced its Q4 2022 earnings and revenue results on Monday, February 28, 2022, in which earnings topped expectations, but sales were steady.
What to look for: the company’s revenue slowed as people started to return to work and clients erased purchases of the remote work software. At the end of January, the company had 509,800 clients with more than ten employees, dropping from 512,100 at the end of the previous quarter. Zoom will stop reporting the number starting in this quarter. In the future, the company expects customers to continue modifying how they operate and interact with their clients, so Zoom expects to address a large market. From now on, the company will be disclosing enterprise customers numbers and net dollar expansion rate among the clients.
Earnings: Stockearning’s Estimated EPS for the fourth quarter was $1.06 per share, but the company topped the figure with an EPS of $1.29 per share. Net income was $490.5 million or $1.6 per share relative to $260.4 million or $0.87 per share a year ago. For the full year, the company had net income attributable to shareholders of $1.375 billion or $4.50 per share compared to $671.5 million or $2.25 per share in FY 2021. Historical EPS performance shows that in the past 12 quarters, the company has topped estimates eleven times (100%) and never missed.
Revenue: For the quarter ending January, the company ireported a 21% revenue increase from last year but a 35% deceleration from the previous quarter. Q4 2022 revenue was $1.071 billion, up from $882.5 million in Q4 2021. Revenue topped FactSet polled analysts' estimates of $1.05 billion. For the current fiscal year, the company expects revenue to be between $4.53 billion and $4.55 billion, which is a 10.7% growth but shy of analysts' expectation of revenue of $4.71 billion.
Stock movement: ZM shares have lost 48.3% since the company released its last earnings release. Interestingly, following the earnings release, the company’s shares have been DOWN 7 times in the past 11 quarters. So, the historical price reaction suggests a 63% probability of the share price going DOWN following the earnings release. According to the Stockearning algorithm, the predicted volatility on the first day is +/-10%, while the predicted volatility on the seventh day is +/-10%.
What analysts are saying: UBS analyst Karl Keirstead slashed his price target on the stock from $250 to $130 but maintained a Hold rating in the stock ahead of the earnings release. Despite the 35% YTD stock decline, Keirstead recommends being on the sideline considering his concerns regarding US market saturation, price compression, and competition from Microsoft Teams.
Citi analyst Tyler Radker slashed his target on the stock from $250 to $147 and maintained a Hold rating on the stock. The analyst believes the stock has a "difficult set-up" heading into Q4 results. Notwithstanding higher "level-set expectations" for fiscal Q4 2022 and the stock's considerable underperformance, the analyst says he's staying on the sidelines, concerned about slowing growth and probable downside to the original fiscal 2022 forecast.
Baird analyst William Power slashed his price target on the stock from$250 to $190 but maintained a Buy rating on the shares. The analyst discussed the impending quarterly earnings results and stated that he prefers the long-term risk/reward and feels that business momentum could alleviate certain growth worries, but that consensus could be too high.
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