Zoom Video Communications (NASDAQ:) has had an incredible run during the pandemic. Demand for the company's digital communications tools boomed during the COVID-19 illness as millions of workers and students flocked to the video conferencing service in a global work-from-home environment.
But as economies reopen globally, and Vaccinations are on the rise, many investors believe the best days for Zoom sales are behind us and it will return to business-as-usual in the future.
Zoom stocks, which hit their all-time high of $588.84 in October last year, are down about 40% from their peak. They closed on Friday at $366.40, up more than 5%.
However, the company's latest version, released early this month, shows that San Jose, California-based Zoom has not lost its growth momentum yet. The company released a sales forecast for the current quarter that exceeded analyst estimates, indicating the company's ability to retain and add major customers even as intense demand from the pandemic eases. rise to $990 million, more than the $942 million analysts had expected. Earnings, excluding certain items, will be $1.14 to $1.15 per share. Analysts estimate $0.94.
Hybrid Work Environment
Facing an imminent slowdown once COVID is under control, Chief Executive Officer Eric Yuan is trying to diversify Zoom's offerings. He has added premium products, such as a cloud-based phone system, to appeal to larger companies, as well as small and medium-sized businesses.
"We have a lot of energy to help lead the evolution towards hybrid work that allows for greater flexibility, productivity and happiness for both personal and virtual connections,” Yuan said in the statement.
Some analysts agree with this approach and see a bright future for Zoom, which became a household phenomenon during the pandemic. RBC analyst Rishi Jaluria, who initiated Zoom's coverage with an outperform rating, said in a note last week that sales will be robust, aided by large corporate clients.
In the note Jaluria stated:
"The future of work is likely to be hybrid and we believe Zoom will be a critical part of enabling that future. We would argue that hybrid and distributed work is a more difficult problem to solve than all employees that work remotely, as meetings take place on different devices (e.g. laptops, mobile phones, hardware meeting rooms).”
RBC set a price target of $450 per share for Zoom, which is nearly 30% higher than where the stock closed Friday. The note adds:
"While we don't dismiss competition, especially from giants like Microsoft (NASDAQ:) and Google (NASDAQ:), we view Zoom's video conferencing as meaningfully differentiated for its reliability, scalability and ease of use. We believe that this and the critical nature of video conferencing will be enough to hold off "good enough" competition, particularly from Microsoft Teams."
Bank of America is another investment bank optimistic about the outlook after the Zoom pandemic. In a recent research note, the bank said the company's stock could rise again this year, erasing much of the decline seen in recent months.
"In our view, Zoom's superior video experience has cemented its position as the premier meeting platform after COVID-19. With the pandemic continuing and companies hiring more flexible workers, we believe 2021 will be another good year. for Zoom," the note said. Bank of America has a target price of $480 for Zoom.
Bottom Line
The majority of analysts see the Zoom Shares aren't likely to bounce back to all-time highs anytime soon as pandemic-fueled use of meeting tools slows down, but there's near consensus that the company has a bright future in the post-COVID world, making its stock a fit candidate to to buy and hold.
