Zoom Q2 earnings: will Zoom prove that they are more than just a pandemic stock?

Zoom prepare to report their Q2 earnings report, but will the gradual easing of restrictions hinder their growth path?

When will Zoom report their latest earnings?

Zoom report their earnings for the second quarter (Q2) of their fiscal year after market close on Monday 30 August 2021.

Zoom enjoyed incredible pandemic success, but will that continue?

Zoom were perhaps the posterchild of the new lockdown norm, with this previously lesser-known tech company managing to fast-forward their development as business, friends, and family interactions were pushed online.

Much like other such benefactors, the critical question for investors is whether the new normal involves a major role for companies such as Zoom.

Ongoing restrictions do ensure an environment for the company to still thrive, although quite how much they have managed to embed their product into business and personal life beyond those temporary restrictions remains to be seen.

The stock is currently over 400% up from pre-Covid-19 levels, highlighting the downside risk in the event of a earnings report which signals a reversal of this huge growth trajectory.

Analysts do expect some degree of slowdown in growth given the gradual removal of restrictions in the likes of the US and UK. However, expectations remain lofty, with analysts largely expecting to the numbers move in the right direction.

Zoom earnings – what to expect

Markets expect to see Zoom revenues continue their upward trajectory, with forecasts of $990 million signalling a potential 49% rise compared with a year prior. Importantly, that would be an improvement from the $956 million reading a last quarter.

Interestingly, markets are expecting a sharp rise in costs for the stock, which could eat into profitability. Pre-tax profits are predicted to come in at $375 million, which while 34% up from last year, also represents a decline from the $403 figure in Q1.

Finally, that decline in profitability is expected to be reflected in the earnings per share (EPS) reading of 1.16, which would be down from the 1.32 seen in Q1.

Zoom earnings – valuation and broker ratings

Despite an impressive rise over the course of 2020 and 2021, there are still many proponent of this stock, with 15 brokers rating the stock a ‘strong buy’ or ‘buy’ recommendation. There are twelve ‘holds’ and one ‘sell’ recommendation.

Zoom shares – technical analysis

Zoom shares have been largely trending downwards over the course of the past 10-months, with fears over how the company will fare post-pandemic hurting sentiment.

However, should the firm prove that they can still continue to grow despite easing restrictions, we could see price break higher from this period. To the upside, we have trendline resistance to watch out for, with the recent level of $406.04 also playing a key role.

Rise through that level would bring about a bullish breakout signal, with the stock at risk of a further near-term downside until that break occurs.

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