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02 March 2021

Capitalising after COVID

Zoom, the video calling platform now synonymous with remote working, reported earnings on Monday evening, displaying strong financials which beat analyst estimates while signalling for even greater future potential.

Revenue for the platform grew by 369% year-on-year to 31st January 2021, beating revenue estimates by US0.43 per share. Zoom has been integral in helping companies transition into a socially distant work environment, while also allowing the public to socialise online. The gross margins generated by Zoom increased by three percentage points during the quarter, and the company lost less users than was predicted by its executives. However, the company does not deny that some customer loss may occur as lockdown restrictions ease.

On top of this, the company’s war chest is piling high, with Zoom ending Q4 2020 with US$4.24bn in cash and cash equivalents, an increase of US$1.87bn from Q3 2020. The company’s Finance Chief, Kelly Steckelberg, eluded to that fact that Zoom would not be opposed to acquisitions with its spare cash, but are yet to find a suitable match.

The future of the company is therefore looking prosperous. Zoom is expecting revenue growth for the full fiscal year of 2022 to be 42%, with analysts expecting US$3.56 bn in revenue. The company is already providing new services to users, with over one million paying users for Zoom Phone which allows for users to make, receive and route calls virtually. These are not new technologies, but what it shows is that users of the Zoom video platform are becoming increasingly accustomed to the brand. We expect that although many workplaces will be returning back to their physical offices, reducing the need for video conferencing, there has certainly been a structural change in the working environment. Many major companies have purposefully broken lease contracts on property which they no longer require due to productivity levels from home working being as, if not more, efficient than when working in the office.

Please note that investments and income arising from them can fall as well as rise in value. This communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.
Capitalising after COVID
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