Shares of the video-conferencing software company Zoom Video Communications (NASDAQ: ZM) surged more than 8% to $80 in after-hours trading on Monday following the company released better-than-expected fourth quarter (Q4) financial results. The company registered over 100,000 enterprise customers, surging by 27% compared to the last year's end results.
Earnings per share (EPS) $1.22 vs. $0.79 expected
Revenue $1.12 billion vs. $1.10 billion expected
"While the macroeconomic situation continues to negatively impact our overall growth, we have maintained a healthy balance sheet and operating cash flow generation of approximately $1.29 billion," Zoom CEO Eric Yuan said.
For the current quarter, Zoom sees earnings of 96 to 98 cents per share on revenue of $1.08 billion to $1.085 billion. Meanwhile, the company forecasts annual revenue below Wall Street estimates. The company expects revenue between $4.44 billion and $4.46 billion for fiscal 2024, compared to the market estimate of $4.6 billion.
Last year, Zoom’s stock plunged more than 90% from its all-time high in October 2020. The stock price has fallen to pre-pandemic levels as the company faces increased competition from the likes of Microsoft Teams and Google Meet. These factors also resulted in many analysts downgrading the company’s stock. Recently, Zoom CEO Eric Yuan announced plans to lay off 1,300 employees, accounting for 15% of its global staff.
Is it the right time to buy Zoom stock?
Based on the fundamentals above and the recent upside momentum, there is a high likelihood that we might continue to see Zoom stock continue to grow in the short term. The next immediate resistance for the stock is near the $85.50 zone then $90, breaks and closes above the $90 level then expects the market to zoom up to $100 and $108.50. On the downside, if the bearish sentiment continues then the crucial support remains at the 52-week low of $63.55 and $60.
For the long-term, it is best to wait for the overall market sentiment to improve because now FED rates are expected to increase further, and there’s daily debate about whether the Fed could be even more aggressive than expected. On the other hand, the share price has had a terrible performance in the last 2 years, so it is still relatively difficult to recommend Zoom as a long-term investment.
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