Zoom Lifts Sales Outlook “..came under fire over privacy and security issues..” – By Todd Horwitz Chief Strategist, Bubba Trading

 

Zoom Lifts Sales Outlook

Zoom Video Communications Inc nearly doubled its expectations for annual sales on Tuesday, driven by a surge in users as more people work from home and connect with friends online during coronavirus lockdowns. But Zoom’s costs also rose sharply, and executives said gross margins would likely remain below Zoom’s historical norms in the coming quarters, sending shares of the San Jose, California-based down to $200.75 in after-market trading.

The company has transformed itself into a global video hangout from a business-oriented teleconferencing tool. It came under fire over privacy and security issues, prompting it to roll out major upgrades.

The company raised its full-year revenue forecast to a range of $1.78 billion to $1.80 billion from $905 million to $915 million. Analysts on average expected revenue of $935.2 million for the fiscal year ending January 2021. The latest quarterly report shows the company now has about 265,400 customers with more than 10 employees, a near fourfold increase from a year earlier.

“The COVID-19 crisis has driven higher demand for distributed, face-to-face interactions and collaboration using Zoom,” Chief Executive Eric Yuan said in a written statement, referring to the disease caused by the virus. “Use cases have grown rapidly as people integrated Zoom into their work, learning, and personal lives.” Zoom said the number of its most lucrative customers had swelled to 90% compared with a year earlier. A broader measure of paying customers, those with more than 10 employees, more than quadrupled year-over-year.

The pandemic has fueled investor appetite in Zoom, with shares more than tripling this year and the stock climbing to a record Tuesday before the company posted its latest results. The stock, which ended the day 1.9% higher, was up about 2% in after-hours trading following the earnings report.

Zoom said sales are likely to continue to advance and reach between $495 million and $500 million in the current quarter, also topping Wall Street forecasts. Sales for the full year, it said, are likely to be roughly $1.78 billion to $1.8 billion, reflecting demand for remote work. That tops the company’s March outlook of $905 million to $915 million, issued before the scale of the pandemic’s impact on businesses became clear. Zoom said it saw a peak number of more than 300 million daily meeting participants in the latest quarter, up from around 10 million at the end of last year before the pandemic hit.

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Todd “Bubba” Horwitz
BubbaTrading.com

Financial Markets and Political Commentary
 

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About the author

Todd Horwitz - Author of “Average Joe Options“. Todd began his trading career in 1980 at the CBOE. He was one of the original traders in the OEX & helped start the SPX. He is a member the CME where he trades S&P futures as well as foreign currencies & is a regular contributor to CNBC, Bloomberg, BNN, Fox & many other major news networks.