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Zoom Video Drops as Revenue Growth Slows

Zoom topped analyst earnings and revenue expectations. One analyst called the shares a bit expensive.
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Zoom Video shares on Friday were after the provider of a video-communications platform reported third-quarter results that topped expectations but also showed revenue growth slowing.

For the quarter ended Oct. 31 the San Jose, Calif., company reported third-quarter net income of a penny a share, compared with a loss of a penny a share in the year-earlier period. Revenue rose 85% to $166.6 million from $90.1 million a year ago.

Analysts surveyed by FactSet were expecting the company to report a loss of 3 cents a share on revenue of $156 million.

While the quarter exceeded Wall Street expectations, revenue growth slowed from the 96% that the company reported in the previous quarter.

“Our execution helped drive revenue growth of 85% with increased non-GAAP profitability year-over-year and free cash flow of $54.7 million,” CEO Eric Yuan said.

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Analysts at Oppenheimer said the company's upside is already baked in. 

"We're largely bullish on Zoom's fundamentals and see a high probability of upside ahead," analyst Ittai Kidron wrote. 

"Yet, Zoom's premium valuation appears to capture much of this upside at current levels and we'd await a better entry point before becoming more constructive."

JP Morgan was more bullish on the stock, lauding the company's "impressive growth" and "impressive margins."

"Both the core video and new phone solutions are gaining traction domestically and in international markets, creating a long runway for growth," analyst Sterling Auty wrote. 

Analysts at KeyBanc raised the company's full year revenue estimate to $610 million from $589 million and fiscal 2021 revenue estimate to $825 million from $801 million.