Zoom Video Communications Inc. (NASDAQ:ZM) fell by more than 5% after reporting impressive third-quarter financial results that topped analysts’ expectations. The sell-off came as investors reacted to growing concerns about the deceleration in the company’s astronomical growth rate. After a monster year aided by the effects of COVID-19, the video-conferencing upstart growth appears to have peaked.
Zoom Sell-Off
The positive developments on the opening of the global economy and reports of highly effective COVID-19 vaccine are some of the factors pilling pressure on the stock’s sentiments in the market. Amid the 5% sell-off, Zoom’s long term prospects remain strong and could prove durable post the pandemic.
A 5% drop after the Q3 earnings report is a drop in the ocean considering the stock is 600% up for the year. In the run-up to the earnings report, the stock rallied by more than 45%. The higher the stock continues to rise, the harder it becomes for even the bullish investors to add positions.
As a leader in video conferencing, Zoom remains well-positioned to continue winning market share given its video-conferencing offering. The ease of use and reliability of the video conferencing solutions means the company remains well-positioned to be a big player in video conferencing even after the pandemic.
People have already echoed their support on Zoom lifting its 40-minute meeting limit during the holiday. Conversely, people are likely to continue using the app to stay in touch with friends and family even after the pandemic.
Revenue Growth
Sales and profit are likely to continue increasing as has been the case quarter over quarter. The company consistently rising guidance, affirms resilience in the core business. The video conferencing expects $811 million in revenue for the current quarter, above $719 million expected by analysts. The revenue guidance indicates a 330% increase from a year earlier.
In the recent quarter, revenues came in at $777 million against $694 million expected, representing a 367% growth on an annualized basis. Earnings per share climbed to 99 cents a share against 76 cents projected.