2 months and counting into lockdown and many of us may be sick of the sight and sound of Zoom calls but the Covid-19 pandemic has certainly been a boost to the company’s revenues and share price. The company last night announced that it has doubled its initial 2020 sales target on the back of a surge in business customers.
In a social context, to keep in touch with friends and family we have been prevented from meeting with physically during the lockdown period, Zoom has become synonymous with the pandemic. But while becoming the most popular social videoconferencing app has been great for Zoom’s brand awareness, with most calls taking place over free-to-use personal accounts, it doesn’t help the company’s bottom line. In fact, the freemium version of the app costs a lot of money to support.
But luckily, the freemium use of Zoom by friends and families has proven a form of soft advertising that has paid off. Zoom’s number of business customers with over 10 employees, the accounts the company actually generates income from, have grown by 345% compared to a year ago.
And it’s not only traditional business clients that have been using professional Zoom accounts to support more remote work during the lockdown. In Collin County, Texas, Zoom was even used to select a jury for a trial that was then also carried out online.
The surge in paid accounts over the past 12 months, with numbers unsurprisingly accelerating since March, saw Zoom’s first quarter profits leap to $27 million from just $198,000 a year earlier. Revenues rose to $328 million over the period from $122 million over the same three months of 2019.
Zoom’s annual revenue forecast has been doubled to $1.8 billion from the $910 million target set at the beginning of the year. That’s a huge leap on analysts expectations for a forecast of $935 million.
Zoom’s share price gained 3.6% in after-hours trading following yesterday’s announcement, taking their value to $215.50. The overall gain since the beginning of 2020 has been over 300%.
However, there is some concern the share price may now be entering bubble territory, fuelled by small investors piling into the stock due to the volume of PR Zoom has had over the past few months as the app cemented itself in the public consciousness. If first quarter profits are annualised to $104 million for the year, at its current price the Zoom stock is trading at an earnings multiple of x570.
Of course, profits may continue to rise over the next three quarters, but the Zoom share price might already look expensive for all but the most courageous investors. For those who bough in early enough, however, the company has proven to be a major winner of the pandemic economy.
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