Zoom’s share price continues to see a lot of volatility as more workers are returning to the office and the group is struggling to keep the momentum going now, we are well beyond the pandemic. The company’s first quarter results were announced in May, and they were well received. Earnings per share were $1.03, and that easily beat the 87 cents that equity analysts were expecting. Revenue for the three-month period slipped by 12% to $1.07 billion, which was in line with forecasts. Amid the lockdowns, Zoom saw its revenue rise by triple digit percentages for five consecutive quarters, but now sales have tapered off since then. By the same token, traders’ expectations have been tempered too. Zoom issued an upbeat outlook for its second quarter, and that lifted sentiment.
The second quarter numbers were delivered in August, and they were pretty good but the forecast disappointed. In the three month period, EPS were $1.05, easily beating the 94 cents anticipated by analysts and revenue was $1.10 billion, slightly below the $1.12 billion that analysts were expecting. In the quarter, sales growth was 8% on the year, down from 12% growth in the previous quarter. The strength of the US dollar was cited for the slowing sale growth. Kelly Steckelberg, the group CFO, said “We have implemented initiatives focused on driving new online subscriptions, which have shown early promise but were not enough to overcome the macro dynamics in the quarter”.
By the end of the second quarter, that company had 204,100 enterprise customers, that equated to less than 3% annual growth on the quarter. It is worth noting that enterprise customers account for 54% of total revenue so it is worrying that such an important division is barely growing. Considering there is growing speculation of a global slowdown or possible recession, the unit might struggle to achieve any growth in the months ahead. With respect to the third quarter forecast, Zoom projected EPS of 82-83 cents, and revenue of $1.095 billion and $1.1 billion, whereas analysts were expecting 91 cents and $1.15 billion respectively.
Zoom’s share price hit a record higher in October 2020, the stock was above $588. It has been trending lower since. On a year-to-date basis, the stock has dropped by 60%. In late September, the stock traded below $73.00, which was it lowest level since January 2020. While the stock holds below the $78.00 mark, it is likely the broad bearish trend will continue, should the stock fall from here it might find support at $70.00. If Zoom’s share price can manage to hold above the $70.00 mark, could be an early sign a rebound is in the offing.