PANDEMIC-FUELED Zoom shares soar 40.8%.
Pandemic-fed market value tops Boeing, Starbucks
NEW YORK — A Zoom call has become an integral part of daily life during the coronavirus pandemic. On Tuesday, Wall Street acknowledged as much by boosting the videoconferencing company’s market value above that of more established companies such as Citigroup, Boeing and Starbucks.
Zoom shares rose 40.8% to $457.69, pushing its market value to more than $129 billion, after the company reported explosive growth during the second quarter as more people paid for subscriptions, giving them more control over virtual meetings.
The stock, which entered the public markets in April 2019, has increased more than fourfold this year.
Zoom’s revenue more than quadrupled from the same time last year to $663.5 million, and profits blew past Wall Street forecasts.
“I’m at a loss for words,” said Rishi Jaluria, an analyst at D.A. Davidson who is bullish on the stock. “After Q1, my colleagues and I said this is one of the best quarters in software history. How do you follow this up? I think they’ve done it. Outside of the massive acceleration in growth, the biggest positive surprise is how much profitability is going to the bottom line.”
At the current level, Zoom’s market value exceeds the combined value of two storied automakers, General Motors and Ford, and is more than double the aggregate value of the nation’s four biggest airlines.
The company is one of the key beneficiaries of the virus pandemic as more people log on to its videoconferencing service to work from home.
In a show of confidence, Zoom raised its revenue projection for its fiscal year
ending in January to nearly $2.4 billion, up from roughly $1.8 billion that the San Jose, Calif., company predicted in early June. The forecast is now more than double the $910 million revenue that Zoom had anticipated as it began its fiscal year.
J.P. Morgan, in a note to investors, said the quarter was both “impressive” and “unprecedented” as it showed strong customer retention and solid growth from customers with more than $100,000 in revenue.
Zoom now has 370,200 business customers with more than 10 employees, a more than fivefold surge from a year earlier. There are now 988 clients spending more than $100,000 on Zoom services, more than double the figure from a year ago.
But, the company also reported a rise in customers with less than 10 employees. Those customers now account for 36% of revenue, according to J.P. Morgan. That is the riskiest customer segment and could mean a pull back in revenue once covid-19 becomes less of a threat and more people return to offices.
The company has also made international growth a priority, bolstering operations in India to gain more users in the world’s second-most-populous nation. The company hired 500 employees in the most recent period and told analysts in a conference call that it would expand spending on sales, marketing, capital expenditures, and research and development in the coming quarters, to take advantage of the market opportunity.
Zoom’s Chief Executive Officer Eric Yuan said Zoom is exploring an entry into the market for virtual events but hasn’t decided whether it will partner or acquire to help businesses host remote conferences.
The results provide “confidence the company may extend its hyper growth beyond the peak of covid-19 through at least the end of 2020,” said Boyoung Kim, an analyst at Bloomberg Intelligence. “The risk of churn as quarantine restrictions ease is manageable, given a rapidly expanding base of enterprise customers, many of which sign annual or multiyear contracts.”