Zoom Video Communications’ Q3 results suggest ‘it’s here to stay’

Zoom Video Communications (NASDAQ: ZM) reported market-beating results for its fiscal third quarter and gave strong guidance for the future on Monday. Shares were initially volatile in after-hours trading but then stabilised at about the same price at which the stock closed the regular session.

RBC analyst explains why he’s strongly bullish on Zoom

On CNBC’s “Closing Bell”, RBC Capital’s Rishi Jaluria said the volatility in extended trading made sense as it was a mixed report with both positives and negatives. He agreed that Zoom might never report the outstanding numbers it did at the peak of the pandemic but said:

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Overall, looking at the numbers, not as bad as feared. The consumer and prosumer base doesn’t seem to be churning off as fast as people were worried. So, I’m inclined to looking at it pretty positively.

Jaluria rates Zoom at “buy” with a price target of $450 that represents a nearly 100% growth from here. Defending his strongly bullish call during the interview, he said:

The way we work has been irreversibly changed due to the pandemic. So, I think Zoom is here to stay. It can become a much broader enterprise communication and collaboration platform as they get into telephony with Zoom Phone, tap, contact centre, events management.

Zoom Phone revenue noted a triple-digit revenue growth in Q3.

Key takeaways from Zoom’s Q3 earnings report

Zoom’s net income printed at $340.4 million that translates to $1.11 per share. In the comparable quarter of last year, it had posted $198.4 million in net income or 66 cents per share. The videoconferencing company generated $1.05 billion in revenue that represents an annualised growth of 35%.

According to FactSet, experts had forecast $1.09 in adjusted EPS on $1.02 billion in revenue.

For the full financial year, Zoom forecasts up to $4.081 billion in revenue with “strong profitability and operating cash-flow growth. Analysts are calling for $4.01 billion in revenue this year.

The California-based company now has over half a million customers with more than 10 employees – a year-over-year increase of 18%, as per the earnings press release.