Reports Q2 2020 results on Monday, August 31, after the close
Revenue Expectation: $ 500.1 million
EPS expectation: $ 0.45
Zoom Video Communications (NASDAQ 🙂 is one of the stocks that benefited enormously from the coronavirus pandemic as millions of workers and students flocked to digital communication tools after COVID-19 forced countries to lock up their citizens, shut down businesses and schools by requiring the population to take shelter in their place.
Investors will turn to the company's second-quarter numbers, released later today, to find out how quickly this San Jose, California-based company is turning subscriber profits into higher profitability.
The surge of over 300% in Zoom shares this year – pushing its market cap to about $ 85 billion in just four months – shows that investors have great confidence in the company's management, which is working on it to make the service a leader in digital communication.
Analysts, on average, expect sales to more than triple to $ 500 million in the quarter ended June 30. Earnings are expected to rise to $ 0.45 a share from just $ 0.08 a share a year ago. In total Zoom expects to generate a whopping $ 1.8 billion this fiscal year, which is almost in 2019.
The current valuation of the stock indicates that investors expect people to linger at home for a long time. And even as the pandemic recedes, more of Zoom's video conferencing tools are expected to be used regularly.
Network Security Issues
Chief Executive Officer Eric Yuan's biggest challenge is to make sure his virtual meeting platform is robust enough to meet the growing demand of a range of users ranging from college students to business executives staying at home during the pandemic.
The company's track record on this front has been mixed so far. Security and privacy concerns have shattered Zoom's credibility from time to time over the past four months.
The Federal Bureau of Investigation office in Boston issued a warning about Zoom in April, telling users not to disclose meetings on the site or share links widely after it received two reports of unidentified individuals invading school sessions, a phenomenon known as & # 39; zoombombing & # 39 ;. . "
At the same time, billionaire Elon Musk's rocket company SpaceX banned its employees from using the Zoom app because it had "significant privacy and security concerns."
Last Monday, webinars and other online meetings were disrupted or inaccessible. Users were unable to sign up for paid accounts, upgrade or manage their service on Zoom's website. The company has not disclosed the cause of the technical problems.
The software maker allows free meetings of up to 40 minutes, but the long-term success of the business depends on how much more paid customers it attracts. The conversion is important for the company to compete with services from Microsoft (NASDAQ :), Cisco (NASDAQ 🙂 and Alphabet (NASDAQ 🙂 Google.
Bottom Line
Even with its impressive gains since April, Zoom still has to show that it is getting more paid subscribers and that its platform is capable of privacy – and eliminate users' security concerns.
That said, Zoom is thriving on the shift to home working, which will continue to grow as consumers and businesses adopt more digital communication practices in the post-virus world.
