Yahoo Finance Zoom Video (ZM) Down 8.1% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Zoom Video Communications (ZM). Shares have lost about 8.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Zoom Video due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Zoom Q4 Earnings Beat, Customer Growth Drives Revenues
Zoom’s fourth-quarter fiscal 2023 adjusted earnings of $1.22 per share beat the Zacks Consensus Estimate by 54.4% but decreased 5.4% year over year.
Revenues of $1.11 billion beat the consensus mark by 1.62% and increased 4.3% year over year on a strong growth from enterprise customers.
Quarter Details
Revenues from Enterprise customers grew 18% year over year and represented 57% of total revenues, up from 50% in fourth-quarter fiscal 2022. This was evident in the 27% growth in customers which came in at 3,471 contributing more than $100,000 in trailing 12 months revenues. These customers accounted for 28% of revenues, up from 23% in the year-ago quarter and span diverse industries, such as healthcare, education, government and more.
The company reported a trailing 12-month net dollar expansion rate for Enterprise customers of 115%.
The number of Enterprise customers grew 12% year over year to more than 213,000. Zoom One adoption continued to accelerate and help drive Zoom Phone to grow more than 100% year over year, surpassing 5.5 million seats in fourth-quarter. Emerging technologies, such as Zoom Contact Center picked up pace as customer experience teams recognized the value of a modern and integrated collaboration solution.
Revenues dropped 9.2% in America, while international market revenues from APAC grew 6.2% year over year. EMEA revenues increased 9.9% year over year.
Operating Details
Non-GAAP gross margin expanded 150 basis points (bps) to 79.8% in the fiscal fourth quarter of 2023.
Research and development expenses increased 42.6% year over year to $103 million. Sales and marketing expenses increased 19.5% to $300.2 million, while general and administrative expenses decreased 11.6% to $83.9 million.
Non-GAAP operating income decreased 3.7% to $404.8 million year over year. Non-GAAP operating margin contracted 300 bps to 36.2%.
Balance Sheet and Cash Flow
Total cash, cash equivalents and marketable securities as of Jan 31, 2022, was $5.41 billion. As of Oct 31, 2022, cash, cash equivalents and marketable securities were $5.17 billion.
Free cash flow was $183.2 million. As of Oct 31, 2022, adjusted free cash flow was $222.1 million.
Guidance
Zoom expects first-quarter fiscal 2024 revenues in the range of $1.08 billion to $1.085 billion.
Non-GAAP earnings per share are expected in the range of 96 cents to 98 cents.
For fiscal 2024, Zoom expects revenues in the range of $4.435 billion to $4.455 billion.
Non-GAAP earnings per share are expected in the range of $4.11 to $4.18.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 14.39% due to these changes.
VGM Scores
At this time, Zoom Video has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Zoom Video has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Zoom Video belongs to the Zacks Internet - Software industry. Another stock from the same industry, HubSpot (HUBS), has gained 4.2% over the past month. More than a month has passed since the company reported results for the quarter ended December 2022.
HubSpot reported revenues of $469.66 million in the last reported quarter, representing a year-over-year change of +27.2%. EPS of $1.11 for the same period compares with $0.58 a year ago.
For the current quarter, HubSpot is expected to post earnings of $0.82 per share, indicating a change of +51.9% from the year-ago quarter. The Zacks Consensus Estimate has changed +3.8% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for HubSpot. Also, the stock has a VGM Score of B.
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Zoom Video Communications, Inc. (ZM) : Free Stock Analysis Report
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