Zoom Video Communications (ZM): Market Darling No More?

09 Dec 2021

By Stephen Ong, Senior Account Executive, Phillip Futures

Zoom Video Communications’ (ZM) stock price gapped down at market open on Tuesday, 23 November 2021 after a poor forecast for Q4 earnings per share (EPS) and revenue even though Q3 earnings met market expectations.

Zoom reported Q3 EPS of $1.11, which topped many analysts’ consensus by $0.02, with a Q3 Revenue of $1.05 billion which also exceeded market consensus slightly.

ZM news updates: Virtual meeting demand in decline?

ZM shares was the market darling for 2020 due to the global adoption of work-from-home policies for most corporations and businesses. ZM stock price benefited hugely from such policies and its stock revenue skyrocketed. However, the ZM management forecast for Q4 is flat with no growth in sight amidst a Q4 revenue of between $1.051 billion and $1.053 billion, which ZM management had said was attributed to many companies returning to normal office hours. Particularly, Zoom witnessed a 35% YoY revenue growth during Q3 this year, however it now expects an almost flat growth of 1% for Q4.

Similarly, there is an addition of just 1% for new Zoom customers from Q2 of this year. Market seems to price Zoom shares as a growth stock, as revenue growth continue to falter and ZM stocks get priced with much lower evaluations like how a value share price would normally behave. The extensive shares price plunge on Tuesday 23th Nov seems to point to the fact that its price action is already in a major correction. Investors had shredded more than $77 billion since ZM stock price’s all-time high.

ZM key stock facts:

Market Capitalization	$62.07 billion
Price/Earnings	55.39
Price/Sales	17.20
Price/Book	12.14
EPS TTM	3.76
Operating Margin	27.30%
Profit Margin	29.29%
52-week high (30/11/2020)	$486.83
52-week low (23/11/2021)	$195.81
Average Volume (M)	6.36

ZM stock forecast: Will $200 support broken on 23th Nov hold?

As of 25 November 2021, the market has struggled and failed to close the $20 gap dropped between $238.20 and $218.61. This could mean that smart money from institutions are staying away from ZM this week and there are not enough retail traders to push up ZM stock price in the short term.

ZM’s major support at $200 was breached on 23 November and this is a significant moment for traders even though it had closed at $208.30 on 24 November. Short term bearish traders are still aiming for the $200 support, and it’s possible that it would be broken again.

Technical indicators such as the 20-day and 100-day exponential moving averages are showing bearish short term and long trends respectively for ZM price action. On the daily chart, ZM stock price has been below the 100-day and its price action had been crumbling since mid-Aug. So far, there is no major historical buying volume to close the ZM gap on 23 November 2021.

ZM MT5 chart

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Stephen Ong is a Senior Account Executive with Phillip Futures. With over 20 years of experience in Stocks and Derivatives, including Forex and Futures, he offers actionable financial insights on multiple asset classes and how best to implement a successful trading plan on market view.

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