Bernstein analyst Zane Chrane is shaking his head at Zoom Video Communications Inc.’s 9% stock slide Friday, after the company topped expectations with its latest results and outlook.
He titled his note to clients, “Sometimes perfection still isn’t enough,” while arguing that consensus estimates “very likely reflect some mismodeling by some analysts as the new subscription business being booked in FY21 is forecast as being down more than 20% versus this year, and down more than 40% year over year in FY22.”
Chrane is of the view that estimates will “aggressively” come up over the next two years given recent growth in the new subscription business, though he lowered his price target on the videoconferencing stock to $107 from $120. He rates Zoom
Others took a more mixed view of the company’s fiscal third-quarter earnings. “Magnitude of beats and commentary around the company’s pace of hiring may serve to pressure shares temporarily,” RBC Capital Markets analyst Alex Zukin said in a note to clients titled: “With Great Multiples Come Great Expectations.”
He reduced his Zoom price target to $75 from $95 while maintaining a perform rating. At least five analysts cut their price targets on Zoom’s stock after the report, according to FactSet.
Guggenheim’s Nandan Amladi cheered evidence of success with the company’s move upmarket, but he cautioned that there are “limited” leading indicators within Zoom’s reported metrics.
“While customer additions and dollar expansion rates are directionally good indicators, Zoom’s [remaining performance obligations] and billings are relatively noisy because of a large share of monthly invoicing and shorter-term contracts,” he wrote. “The move upmarket could help increase annual prepayments that make billings more useful, but in the meantime, investors only have revenue guidance as the main leading metric.”
He has a buy rating on the stock and a $90 target.
Zoom shares are off 26% over the past three months, as the S&P 500
has gained 5.7%. At about $63, the stock is trading significantly above its April IPO price of $36.