Zoom Video Communications (ZM) – Get Zoom Video Communications (ZM) Report shares plunged Tuesday after the video-chat company that has proved vital through the pandemic reported better-than-expected quarterly earnings but warned of a revenue slowdown as the pandemic wanes.
Zoom reported net income of $340.3 million, or $1.11 a share, vs. $198.4 million, or 66 cents a share, in the same period a year ago. Analysts polled by FactSet had been expecting per-share earnings of $1.05 a share.
Revenue increased 35% to $1.05 billion from $777.1 million in the year-earlier quarter. Analysts polled by FactSet had been looking for revenue of $1 billion.
Analysts and investors focused more on the company’s outlook, however, with Zoom stock falling more than 8% in premarket trading on expectations that a broader shift back to work- and in-person gatherings will weigh on the company’s future sales and earnings.
For the fiscal fourth quarter, Zoom is forecasting adjusted earnings of $1.06 to $1.07 a share on revenue of between $1.051 billion and $1.053. Analysts polled by FactSet are currently expecting adjusted earnings of $1.05 a share on $1 billion in revenue.
Barclay’s analyst Ryan MacWilliams pointed out in a research report before Zoom’s earnings that the company has done a good job navigating itself higher through the pandemic, adding “channel partnerships, global service coverage, and international distribution,” – all while its more recent share-price drop has made the valuation “more reasonable.”
In the race to sign up “wall-to-wall large enterprise communications (cloud video/phone/chat),” MacWilliams said he believes Zoom is Microsoft’s “most significant competitor.”
At the same time, other players including Microsoft (MSFT) – Get Microsoft Corporation (MSFT) Report, which continues to push its Microsoft Teams service, as well as the likes of Facebook (FB) – Get Facebook, Inc. Class A Report (soon to be Meta (META) ), Apple (AAPL) – Get Apple Inc. (AAPL) Report, Snapchat SNAP and others that are enhancing their multi-video chat offerings will continue to nip at Zoom’s heels, all while its personal and small-business use potentially plateaus.
At last check, Zoom shares were down 8.78% at $221. The stock is down more than 32% year to date though still up more than 290% over the past five years.