Zoom Video Communications (ZM) Q4 profit beats estimates, guides Q1 above view

Zoom Video Communications Inc. (NYSE: ZM) reported a jump in earnings for the fourth quarter of 2020 as the demand for video-first unified communications platform drove the top line higher. The results exceeded analysts’ expectations. Further, the company guided earnings and revenue for the first quarter and fiscal 2021 above the consensus view.

Net income soared by 1180% to $15.3 million or $0.05 per share. Adjusted earnings increased by 275% to $0.15 per share. Revenue surged by 78% to $188.3 million. Analysts had expected EPS of $0.07 on revenue of $176.55 million for the fourth quarter.

Looking ahead into the first quarter of 2021, the company expects revenue in the range of $199-201 million and adjusted earnings of about $0.10 per share. Analysts expect EPS of $0.06 on revenue of $185.68 million for the first quarter.

For fiscal 2021, the company predicts total revenue in the range of $905-915 million and adjusted earnings to be in the range of $0.42-0.45 per share. The consensus estimates EPS of $0.30 on revenue of $868.37 million for the full year.

For the fourth quarter, the top line was driven by acquisitions of new customers and the expansion of existing customers. This was backed by a 61% growth in the number of customers with more than 10 employees and 86% growth in the number of customers contributing more than $100K of TTM revenue.

Despite the top-line growth, the company has been showing a consistent decline in the revenues growth rate since the first quarter of 2020. The market experts believe that the short-term weakness has been slowly impacting the company’s top-line growth, which exhibits a material deceleration in the rates and this is likely to continue for this year.

Read: AT&T Q4 earnings review

As of January 31, 2020, the company had cash and cash equivalent plus marketable securities of $855.2 million while the total liabilities stood at $455.9 million.

The stock closed Wednesday’s regular session down 0.57% at $116.80. Following the results, the stock dropped over 4% in the after-hours. At current levels, the fair value is reaching an overvalued point with an estimated return of negative 39%.

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