Zoom video communications shares have climbed and then dipped in the most astonishing way. The company’s shares soared during the pandemic period, only for them to experience a sharp decline in the post-pandemic time.
The stock seems to have lost all of its massive pandemic-era gains, with declines of roughly 50% so far and over 70% over the last 12 months. Zoom enthusiasts hope that the company’s results for the fiscal first quarter ended April, due to be released after Monday’s trading, will stop the bleeding.
For the quarter, the company released guidance for revenue between $1.07 billion and $1.075 billion with non-GAAP earnings of 86 to 88 cents a share; Wall Street consensus estimates $1.073 billion in revenue and earnings of roughly 88 cents a share. With would imply a topline growth of roughly 12%, a grave departure from when Zoom (ticker: ZM) at some point posted consistent growth of 360% or more in three consecutive quarters.
For the January 2023 fiscal year, Zoom projected revenue of $4.53 billion to $4.55 billion, which represents an 11% increase, with non-GAAP earnings of between $3.45 and $3.51 a share.
A few of the issues the company currently faces include the re-opening of schools and offices along with the revival of corporate travel, which has reduced people’s need for the company’s core service. Zoom has since expanded to other related industries, such as cloud-based technology and call centre software- however, it remains highly reliant on the core video conferencing operations.
Within videoconferencing itself, the company faces real competition from companies like Microsoft (ticker: MSFT) Teams, which has combined its tools with office 365 while at the same time offering a low-cost version of the software to small businesses.
Karl Keirstead, a UBS analyst, recently stuck to his Neutral rating on the stock, cutting his target price to $100 from $130. The analyst went ahead to report that UBS surveyed about 400 IT decision-makers about Zoom; the survey found that almost 60% of their spending on Zoom 2022 would rise by a mere 5% or less, with 85% expecting growth of 15% or less. On the other hand, 92% of respondents were in the process of consolidating their videoconferencing tools.
“Most respondents said they were most likely to consolidate onto Microsoft Teams, but Zoom did come a relatively close second,” the analyst said.