Record Quarterly Report Didn't Save Zoom Shares from Falling
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At the beginning of June, I wrote about Zoom shares falling regardless of a strong quarterly report. Now the situation is quite similar: I'm speaking about this popular platform for video calls again, but this time the shares of the company headed down after not just good but record financial statistics.
Are you ready to hear everything most important and thrilling about what's happened? Let's get started! As you remember, a fresh-from-the-oven tech analysis of Zoom Video Communications analysis by Maksim Artyomov is also there for you.
Zoom report for Q2, financial 2022
On August 30th, after the trading session closed, Zoom Video Communications published its financial and operational results of May-July. Quarterly revenue rose over $1 billion for the first time in the company's history. Precisely, in Q2, financial 2022, the platform for video conferencing earned $1.02 billion.
In the company, they had expected these digits to be more modest. Wall-Street analysts shared this view. In the end, the quarterly statistics were a nice surprise though not for anyone, but I'll explain this later.
And now — to the forecast for the financial 2022: the company expects the total revenue to amount to $4.01-4.02 billion and the return on stock — to $4.75-4.79. As you remember, previous forecast was $3.98-3.99 billion and $4.56-4.61, respectively.
Important report details
- Revenue — $1.022 billion, +54%.
- Net profit — $317 million, +70%.
- Operational expenses — $465.6 million, +64%.
Zoom Video Communications shares fell
On August 31st, on the next day after the report was published, the stock price of Zoom Video Communications (NASDAQ: ZM) dropped by 16.24%, reaching $291.07. This has become the gravest decline this year.
Tech analysis of Zoom Video Communications shares by Maksim Artyomov
After the increased revenue was reported, Zoom shares didn't stop giving up positions. Last trading session opened and closed with significant gaps. Regardless of bright forecasts, the company failed to return the trust of investors. The price finally broke through the support in the form of the 200-days Moving Average and is heading for $274.
As long as the quotations once tested this level and bounced off it, I think that the current situation will develop by the same scenario. After a test of the support level, the price will bounce off it, and an ascending impulse will begin.
Why Zoom Video Communications shares fell
The company, indeed, managed to bring the revenue to such a high level — over $1 billion. But the market players were more interested in the speed of the growth, not the sum. Seeing this, we stop smiling.
In Q2, financial 2022, the revenue grew by 54% compared to the same period of the previous year. A quarter before, the growth amounted to 191%. The analysts of the IT company itself, in the next quarter the growth will be even smaller — 31%.
A slow-down in the speed of growth only increases the general doubts in the future of the service: quarantine measures are being eased, working and learning from home is becoming less necessary. All this makes clients, especially large ones, spend less on video conferencing.
The growth of the number of new users is also slowing down. In February-April, the number of clients with 10 and more employees increased by 87% (497,000 enterprises). The comparison was between Q1, 2021 and Q1, 2022. In May-July, the growth amounted to 36% only, to 504,900 clients.
A similar situation is there with the increase in the number of client companies earning over $100, 000 a year. In Q1, 2022, the increase was 160%, in Q2 — 131%.
Summing up
The quarterly revenue of Zoom Video Communications beat a record, reaching over $1 billion for the first time in the company's history. However, analysts and investors doubted that the corporation was able to have profitable clients and keep the speed of growth that was so impressive in the midst of the pandemic. This made the shares fall by over 16%.
