Zoom Video Plunges 12% After Hours on Poor Guidance Despite Q4 Beat

American communications technology company Zoom Video Communications, Inc. (ZM), which is renown for its video conferencing service, posted stellar results for the fourth quarter and fiscal year ending January 31, 2022.

Zoom’s results beat on both the earnings and revenue front backed by strength in its global customer base, with varied usage of its broadening communications platform.

However, ZM stock plunged more than 11.8% during the extended trading session, after the company’s guidance for Q1FY23 and FY23 fell short of expectations. Zoom’s shares erased the gains made during intraday trading when the shares gained 5.8% in anticipation of solid results.

Notably, the company’s year-end customers who contributed more than $100,000 in trailing 12 months revenue increased 66% to 2,725 compared to the prior year.

Additionally, the company’s Board of Directors also approved a new share buyback program for up to $1 billion of Zoom’s Class A common stock.

Stellar Results

Zoom’s Q4 revenue of $1.07 billion meaningfully surpassed analysts’ estimates of $1.05 billion, and also came in 21% higher than the Q4FY20 number.

Similarly, the company reported Q4 adjusted earnings of $1.29 per share, 24 cents better than analyst estimates of $1.05 per share, and also came in 5.7% higher compared to the same quarter last year.

Moreover, FY22 revenue advanced 55% to $4.1 billion and full-year adjusted earnings stood at $5.07 per share, much higher than the FY21 number of $3.34 per share.

Founder & CEO Comments

Happy with the results, Founder and CEO of Zoom, Eric S. Yuan, said, “Looking forward, we are addressing a large opportunity as we expect customers will continue to transform how they work and engage with their customers. It is apparent that businesses want a full communications platform that is integrated, secure, and easy to use. We are proud to lead the charge of the digital transformation for communications.”

“To sustain and enhance our leadership position, in the fiscal year 2023 we plan to build out our platform to further enrich the customer experience with new cloud-based technologies and expand our go-to-market motions, which we believe will enable us to drive future growth,” Yuan concluded.

Disappointing Guidance

Based on current business momentum, Zoom guided Q´´1FY23 revenue to fall between $1.07 billion and $1.075 billion, while the consensus is pegged at $1.1 billion. Meanwhile, Q1 adjusted earnings are projected to be between $0.86 per share and $0.88 per share, lower than the consensus of $1.05 per share.

Similarly, FY23 revenue is projected to be between $4.53 billion and $4.55 billion, while adjusted earnings are expected to be between $3.45 per share and $3.51 per share. Both revenue and earnings fell significantly lower than the consensus estimate, with revenue pegged at $4.71 billion and earnings at $4.40 per share.

Consensus View

The Wall Street community is cautiously optimistic about the stock with a Moderate Buy consensus view based on 7 Buys and 6 Holds. At the time of writing, the average Zoom price target was $201.63, which implies 52.06% upside potential to current levels.

Remarkably, shares of Zoom, which is one of the best stay-at-home stocks, have lost 67.6% over the past year.

Blogger Opinions

TipRanks data shows that financial blogger opinions are 80% Bullish on ZM, compared to a sector average of 68%.

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