Zoom Announces $1.75B Public Offering; Sells 1M Phone Seats

Zoom closed almost 6% higher yesterday after announcing that it would be offering around 5.1 million shares to the public at $340 per share in a bid to raise approximately $1.75 billion. The funds will be used for “general corporate purposes” and the offering will close on Friday, January 15, 2021.

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J.P. Morgan will be the sole underwriter for the offering and has received a 30-day option to buy up to an additional 735,294 shares.

Zoom (ZM) has grown tremendously since first listing its shares on the Nasdaq in 2019 at $36 a share, and its share price has appreciated by around 390% over the last year.

The coronavirus pandemic changed the way people communicate, and Zoom was able to capitalize on the increasing need for remote communication services and applications.

Additionally, Zoom announced that it had reached one million Zoom Phone seats around the world.

“Going from zero to a million licenses in less than two years is a testament to the growing need for a rich cloud telephony solution like Zoom Phone. Organizations around the world no longer have to just settle for a phone solution; they can choose one that strategically scales with their business,” said Graeme Geddes, Head of Zoom Phone & Rooms. (See ZM stock analysis on TipRanks)

D.A. Davidson analyst Rishi Jaluria reiterated his Buy rating on ZM three weeks ago, setting a price target of $600 (68% upside potential).

Jaluria feels that the logical choice for Zoom would be a move into email as customers try to consolidate vendors, shifting the demand to software suites rather than individual “best-of-breed” products. He also noted that Zoom had about $1.9 billion in cash, allowing it to make acquisitions in related product areas.

Consensus among analysts is a Moderate Buy based on 11 Buys, 12 Holds and 1 Sell. The average price target of $485.68 suggests upside potential of around 36% over the next 12 months.

What’s more, News Sentiment around ZM shares is Very Bullish, with 100% of articles about the stock in the past seven days echoing a positive sentiment, compared to a 65% Bullish sector average.