Like in the case of all newly listed companies, the growth initiatives would result in a spike in expenses, which in turn puts pressure on margins. Also, the increased volatility in the stock’s performance ahead of the announcement can be a cause for concern. However, Zoom Video’s impressive valuation and steady operational improvements are enough reasons for investors to be optimistic about its prospects in the long run.
Nevertheless, the upcoming quarterly report will be a litmus test for its future performance as a publicly listed company. The management expects to sustain the recent top-line growth and looks to achieve 60% revenue growth in fiscal 2020. When it comes to long-term profitability, a lot will depend on how aggressively the company invests in expansion initiatives outside the US.
After reporting a modest turnaround in the first quarter of 2020, the management expressed hope of staying in the positive territory in the second quarter too. It is looking for earnings in the range of $0.01 per share to $0.02 per share, which is slightly above analysts’ forecast of $0.01 per share earnings on revenues of $130.31 million.
Zoom reported adjusted earnings of $0.03 per share for the first quarter of 2020, marking an improvement from the $0.02 per share loss reported in the year-ago quarter. The bottom-line also came in above analysts’ forecast. Revenues more than doubled to $122 million, spurring a stock rally.
Since going public in mid-April, Zoom Video’s shares have gained 48%. After the first-quarter results were published, the stock had made strong gains and crossed the $100-mark, but retreated later.