Zoom (ZM) - Get Report wiped the floor clean on earnings Monday and gave strong guidance, as software demand among businesses in the at-home environment is explosive. Buying the stock earlier in 2020 would have been ideal, but there’s still an argument for buying now.
The stock rose 9% to $354 share in post-market trading, after having risen 37% since August 11 into the earnings print.
The stock entered the earnings at around 50 times 2021 sales, although its valuation has reached far above that in the past, leaving room for upside on the earnings.
Here’s what the company reported against Wall Street expectations:
- Revenue: $663 million v. $500M (actual result: +355% year-over-year)
- Operating Margin: 41% v. 26.6%
- Adjusted Earnings Per Share: 92 cents v. 45 cents
Zoom also had 370,000 total customers with 10 or more employees, up 458% year-over-year, potentially signifying businesses of all sizes are aggressively moving into software high-tech products for day-to-day business needs like communications, as the work-from-home environment is in full swing. "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,” management said on the earnings report.
The strong operating leverage helped power the profit growth, although the pure demand for Zoom’s offerings were the major driver. Adjusted eps in the same quarter last year was 9 cents, making this year’s growth more than explosive.
Management is guiding for full-year 2021 revenue of roughly $2.38 billion, another relatively strong growth rate over 2020 expectations. Adjusted earnings per share was guided for a mid point of $2.44.
The market cap is now about 42 times management’s 2021 sales estimate, leaving more room from upside even from the stock’s current level. Some analysts do warn, though, that some of the demand surge in software may be pulling forward from years in the future that may disappoint, relative to current trends.
Still, Ed Ponsi, TheStreet’s Founder Ponsi Charts and Managing Director of Barchetta Capital Management, Ed Ponsi, says the strong guidance points to continued momentum in demand at least for now.
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