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Mar 23, 2020

Zoom Video extends 2020 rally, doubling amid pandemic boost

Zoom Video

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Zoom Video Communications Inc. shares jumped for a sixth straight session on Monday, as investors continued to bet that the teleconferencing company would be one of the rare winners from the coronavirus pandemic.

Shares spiked as much as 22 per cent, trading almost twice its daily average volume, in their biggest one-day percentage gain since June 2019. The stock is up more than 40 per cent over the six days, and it has more than doubled this year, with recent gains coming on signs of higher usage.

On Friday, the company’s chief financial officer said it had bolstered its network capacity in order to manage unprecedented demand. The surge comes as more and more people work from home or use the video-conferencing software to keep in touch rather than meet in person.

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Recent data from Sensor Tower have shown “big upticks across the board” for mobile-app downloads for work-from-home services. Zoom’s app had download growth of 109 per cent, according to the data. “Many businesses are making their first moves into remote work and gravitating toward the biggest players, like Zoom or Microsoft,” said Randy Nelson, head of mobile insights at Sensor Tower, who spoke with Bloomberg News in a phone interview.

KeyBanc Capital Markets wrote that such trends were driving “a billings inflection in the first two weeks of March,” along with higher market share for Zoom.

Needham last week started coverage on the stock with a buy rating, expecting it will benefit both throughout the pandemic as well as after, as remote work becomes more common.

The coronavirus tailwind contributed to stronger-than-expected fourth-quarter results earlier this month, and analysts continue to grow more bullish on Zoom’s prospects.

For the first quarter, Zoom is expected to report adjusted earnings of about 10 cents a share, a forecast that has risen by 68 per cent over the past month, according to Bloomberg data. Revenue expectations have risen 7.6 per cent over the past month.

For the full year, analysts expect Zoom to report adjusted earnings of about 44 cents a share and revenue of US$917 million. The earnings forecast is up more than 50 per cent over the past month, while the consensus for revenue is ahead 5.9 per cent over the same period.

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