Zoom Video Communications Stock News and Forecast: ZM shares headed to $180


  • Zoom Q3 earnings came in just above expectations.
  • ZM Q4 earnings forecasts have scared the market.
  • Shareholders have lost more than $77 billion since ZM stock all-time high.

Third-quarter earnings slammed shares of Zoom Video Communications (ZM) on Tuesday. ZM stock gapped down at the open, closing an astounding 14.7% lower at $206.64. Though Zoom beat on both earnings per share (EPS) and revenue, the sell-off was due to a lacklustre Q4 forecast. The stock continues to lose ground in Wednesday's premarket.

 

 

Zoom Stock News: Return to offices hurting virtual meeting expectations

Zoom reported Q3 EPS of $1.11, which bested Wall Street consensus by $0.02. Revenue of $1.05 billion slipped by at $31 million above consensus. You might say ZM was almost exactly in line with expectations. 

ZM was a top stock of 2020 due to the new work-from-home policies of much of corporate America. The stock's revenue soared, and so did the ZM share price. Management's fourth-quarter forecast, however, basically look forward to essentially no growth. Management calls for Q4 revenue of between $1.051 billion and $1.053 billion, which they said was due to so many workplaces returning to normal office hours.

In other words, while Zoom saw 35% YoY revenue growth during Q3, it now expects sub 1% growth for the next quarter. Likewise, the number of customers rose just 1% from the second quarter of this year. Zoom appears to be levelling off as a growth stock. Of course, whenever revenue growth falls, stocks get priced with much lower variables like value stocks. The major drop on Tuesday leads one to believe that that is where the market is pushing this one.

Wells Fargo analyst Michael Turrin wrote, "We expect these headwinds to weigh on results over the next several quarters, keeping shares range-bound until clearer signs around what's next for Zoom post hyper growth emerge." He cut the ZM price target from $275 to $245.

Some analysts still see high upside for Zoom shares. KeyBank Capital market cut its price target from $398 to $344. Mizuho Securities cut its Zoom price target from $350 to $300.

Piper Sandler analyst James Fish called the heavy sell-off "overblown".

ARK Invest's Cathie Wood, a longtime supporter and investor in Zoom, bought the dip on Tuesday in spectacular fashion. Two ARK ETFs bought more than 645,000 shares on Tuesday, 

ZM key statistics

Market Cap $61 billion
Price/Earnings FWD 56
Price/Sales 17
Price/Book 13
Enterprise Value $180 billion
Operating Margin 28%
Profit Margin

29%

52-week high $588.84
52-week low $195.80
Short Interest 4%
Average Wall Street Rating and Price Target Buy, $337.65

Zoom Stock Forecast: $180 only support in sight

At some point, Zoom price will need to fill the $20 gap created between $238.20 and $218.61. That time is not now, however. Zoom shares spent most of their time down around 1% in Wednesday's premarket, which signals that institutions are unlikely to provide enough buying power to raise the share price in the medium term.

On Tuesday the low reached a 52-week low at $195.80. Breaking the $200 psychological level was key even though ZM stock closed above it. The $200 level is quite likely to give way once again.

The 20-day moving average, which had begun to tease a break above the 50-day moving average, will begin to separate and break much lower today. It has been below the 50-day since mid-August on the daily chart. At present, there is no major historical volume at the current price just above $200. ZM price pushed through here rapidly in a two-week period in June 2020. This means there is a vacuum at current prices.

On the weekly chart, the more likely forecast for Zoom stock at the moment is a move to $180, which separate weekly candles in April and May of 2020 treated as severe resistance. FXStreet expects this long-lost resistance to returning as support in the near future.

ZM daily chart

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