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Where next for Zoom stock after jumping 44% post-earnings?

Zoom’s better-than-expected Q2 earnings has prompted the company to raise its full-year guidance for fiscal 2020 by over 30%.

Zoom video communications conferencing tool share stock price forecast target prediction earnings revenue guidance analysis analyst walls street NASDAQ ZM Source: Bloomberg

Zoom Video Communications' (NASDAQ: ZM) share price opened 44% higher after the company reported its Q2 financial results on Tuesday 01 September 2020.

Shares smashed through a previous high to peak at US$478 on an intraday basis, before closing the day at US$457.63 a share on the IG platform.

IG's client analysis shows that 73% of all opened positions on Zoom are currently 'long', indicating an expectation for price to increase.

Highlights from Zoom’s Q2 earnings

Here are some things that stood out in the video communication tool’s second quarter results for the three months ended 31 July 2020:

  • Revenue: Total revenue for the quarter was US$663.5 million, up 355% year-over-year.
  • Unadjusted net income and net income (earnings) per share: GAAP net income attributable to common stockholders for the quarter was US$185.7 million, or US$0.63 per share, compared to GAAP net income attributable to common stockholders of US$5.5 million, or US$0.02 per share in Q2 fiscal 2020.
  • Adjusted net income and net income per share: Non-GAAP net income for the quarter was US$274.8 million, while non-GAAP net income per share came in at US$0.92. This surpassed Refinitiv analyst estimates of US$0.45.
  • Cash Flow: Net cash provided by operating activities was US$401.3 million for the quarter, compared to US$31.2 million in the second quarter of fiscal year 2020. Free cash flow was US$373.4 million, compared to US$17.1 million in the second quarter of fiscal year 2020.
  • Customer Metrics: At the end of Q2 2021, Zoom had approximately 370,200 customers with more than 10 employees, up roughly 458% from the same quarter last fiscal year.

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What do these results mean for Zoom’s stock outlook?

Zoom’s revenue for this quarter exceeded Wall Street estimates of US$500.5 million by 33%, while earnings per share also smashed analyst expectations by a massive 104%.

These impressive results have also prompted the company to raise its guidance for the full 2021 fiscal year.

The company stated that total revenue for the year is now expected to be between US$2.37 billion and US$2.39 billion, up from US$1.78 billion to US$1.8 billion previously. This represents an increase of over 30%.

Meanwhile, non-GAAP diluted earnings per share (EPS) is expected to be between US$2.40 and US$2.47, up from US$1.21 to US$1.29 previously. This figure also surpasses even the highest analyst full-year estimate of US$1.60 per share.

In terms of Zoom’s share price, IG UK chief market analyst Chris Beauchamp wrote that ‘there is no sign that a more bearish turn is near’.

‘The most recent dip below the 50-day Simple Moving Average (US$263) was met by strong buying which gave the price the energy to rally to a new record by the end of August. This puts sellers on notice that any reversal will need to clear the August low at US$229 to provide any real near-term bearish outlook,’ he added.

Zoom stock technical analysis earnings outlook prediction share price eps revenue sales target Zoom share price analysis

How to trade Zoom with IG

Are you feeling bullish or bearish on the Zoom stock? Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps:

  1. Create a live or demo IG Trading Account, or log in to your existing account
  2. Enter <Zoom Video Communications Inc> in the search bar and select the instrument
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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