Zoom Video Communications, a videoconferencing provider, has published its figures for the last quarter. Despite growth in sales and profits, Zoom shares (ISIN: US98980L1017) have lost a lot of ground. The reason: the outlook for the future is cloudy as many people return to the office.
Zoom managed to post significant gains in its second fiscal quarter. Sales amounted to 1.02 billion dollars. In the same quarter of the previous year, the company earned $663.5 million. Sales growth was therefore 54%.
Zoom was also able to achieve a significant increase in profits. In the end, 317 million dollars were credited. The previous figure was $186 million. Earnings per share rose from $0.92 to $1.36.
New outlook prompts pessimism
However solid the figures announced, most analysts and investors focused on the outlook for the future. Unfortunately, the outlook has darkened considerably.
As a result of the Corona pandemic, many companies have been forced to cut back significantly on office work and ask employees to continue working in their home offices. As a result, the demand for digital communication and videoconferencing, such as that offered by Zoom, increased significantly.
Zoom’s share price has risen by almost 650% in the last year. There has long been a lively discussion about the extent to which the home office could replace the office as the new norm in the world of work. It is true that the home office rate is higher after the end of the restrictions than before. Nevertheless, many companies are returning to working from the office.
For Zoom, however, this development means that the outlook for future growth is now much bleaker. Zoom is already more cautious about the current quarter. The company has already prepared its investors for weaker business growth. Sales growth in the third quarter is expected to be just 30% compared to the same period last year.
The outlook for the future should also make investors anything but optimistic. In particular, the fact that Zoom is already in a position to win large, less lucrative customers is likely to have a significant negative impact on growth over the coming quarters. There are many indications that the boom of the initial period of the pandemic will not last.
Zoom share price plummets
The fact that investors are far from satisfied with this outlook was clearly felt on the stock market. In after-hours trading on Monday, Zoom’s share price fell by 11.14%. The negative trend continued on Tuesday. The Zoom share is currently trading at just 246.75 euros.
In the last 30 days, the share price has already lost around 23%. However, those hoping for a bargain and wondering whether it is worth buying Zoom shares should bear in mind that the stock is still very well valued despite the recent heavy losses.
At the same time, Zoom seems to have realised for some time that the videoconferencing boom will not last forever. That’s why the company is currently trying to expand its position outside the core business.
Last July, Zoom bought call centre specialist Five9 for nearly 15 billion dollars. This was the largest acquisition in the company’s history. A month earlier, Zoom had already made a purchase in Germany, acquiring Kites, a Karlsruhe-based machine translation specialist.
