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News

Zoom video shares surge amid upbeat earnings

 

Tuesday, May 24, 2022

The news shaping the markets today

Russian diplomat Boris Bondarev announced his resignation to protest against the ongoing war with Ukraine, saying “enough is enough.” The US dollar index rose after the news.


Japan’s au Jibun Bank services PMI rose to a five-month high of 51.7 in May, versus 50.7 in the previous month. Services activity expanding for the second straight month lent support to the JPY/USD forex pair.


Australia’s flash services PMI declined to 53 in May, from 56.1 in the previous month, which sent the AUD/USD pair lower in forex trading this morning.


New Zealand’s retail sales declined 0.5% during the first three months of the year, versus 8.3% growth in the earlier quarter, sending the NZD/USD forex pair lower.


South Korea’s Composite Consumer Sentiment declined by 1.2 points from the previous month to a reading of 102.6 in May, exerting pressure on the KRW/USD pair in forex trading this morning.

 

What’s happening: Shares of Zoom Video Communications rose on Monday, after the company posted upbeat earnings for its first quarter.

 What happened: Zoom Video also boosted its full-year profit forecast, driven by strong demand from large businesses.

The software maker’s stock jumped sharply after the release of quarterly results but gave up most of the gains as investors focused on one worrying matrix.

How were the results: The San Jose, California-based company reported double digit growth in sales for the first quarter, exceeding market views.

  • Revenues climbed 12% year-over-year to $1.074 billion, exceeding market expectations of $1.07 billion.
  • Earnings came in at $1.03 per share, ahead of the consensus estimate of 87 cents per share.

Why it matters: Zoom Video had experienced a sharp rise in business with people working and learning from home amid the covid-19 pandemic.

However, over the past few quarters, there has been a slowdown in demand due to easing restrictions and rising competition from giants like Microsoft’s Teams and Google’s Meet.

Revenues from Zoom’s high-paying enterprise customers climbed 31% in the quarter, contributing around 52% of its overall revenues. The company had around 198,900 enterprise customers at the end of the quarter, representing 24% growth. Of these, 2,916 customers generated over $100,000 in revenues during the trailing twelve-month period, up around 46% from a year ago.

The company launched Zoom Contact Center, Zoom Whiteboard and Zoom IQ for Sales during the quarter. “We believe these innovative solutions will further expand our market opportunity for future growth and expansion with customers,” CEO Eric Yuan said during the earnings call.

Zoom Video projected Q2 revenues between $1.115 billion and $1.12 billion, broadly in-line with expectations. Management also guided to quarterly adjusted earnings of 90-92 cents per share, significantly higher than the Street expectations of 88 cents per share.

For the full year, Zoom Video projected revenues between $4.53 billion and $4.55 billion, in-line with market expectations. The company also raised its guidance for adjusted earnings from the previous $3.45-$3.51 per share to of $3.70-$3.77 per share.

 How shares responded: Zoom Video’s shares initially jumped around 21% following the release of quarterly results but gave up most of the gains to settle higher by 4.7% at $93.54 in after-hours trading on Monday, as investors focused on a slowdown in the company’s revenue growth. The stock has tumbled more than 51% year to date.

 What to watch: Investors will continue monitoring the covid-19 pandemic, as a resurgence could provide another boost to the company’s overall results. Stiffening competition will also remain in focus.

The markets today

European stocks will be in focus today ahead of several major economic reports

 

Context: European stock markets settled higher on Monday, despite ongoing concerns around the global economy.

 Details: Equity markets in Europe had closed higher on Friday, after sharp volatility through the week due to growing recession fears.

Despite closing higher on Friday, European markets still recorded weekly losses. US stocks also recorded losses last week, with the Dow Jones extending its downturn for the eight straight week.

The World Economic Forum is scheduled to commence in Davos this week, which will bring several leaders from around the world together after the pandemic.

Investor sentiment was supported by a surprising improvement in Germany’s business sentiment to a three-month high of 93 in May, versus market expectations of 91.4.

The pan-European Stoxx 600 gained 1.26% to close at 436.54 on Monday, with most sectors recording gains in the session. Banking and mining shares were among the top performers in the session.

London’s FTSE 100 rose 1.67% to close at 7,513.44, while the DAX 40 and the CAC 40 added 1.38% and 1.17%, respectively.

What to watch: Investors await the release of data on Eurozone’s manufacturing PMI, services PMI and composite PMI today. The S&P Global Eurozone manufacturing PMI, which was revised higher to 55.5 in April, is expected to decline to 54.9 in May. The services PMI is projected to decline to 57.5 in May, from 57.7 in April. A speech by ECB President Odette Lagarde will also remain in focus today.

Other Markets: US indices closed higher on Monday, with the Dow Jones, S&P 500 and Nasdaq 100 up by 1.98%, 1.86% and 1.68%, respectively.

Support & resistances for today

Technical Levels News Sentiment
GBP/USD – 1.2554 and 1.2565 Negative
EUR/JPY – 136.24 and 136.35 Positive
Gold – 1847.86 and 1850.00 Positive
FTSE 100 – 7498.83 and 7509.65 Negative
Dow Jones – 31782.12 and 31948.19 Positive

Market snapshot

What else to watch today

UK’s public sector net borrowing, manufacturing PMI, services PMI, composite PMI and CBI distributive trades survey’s retail sales balance, France’s manufacturing climate indicator, business climate indicator, manufacturing PMI, services PMI and composite PMI, South Africa’s leading business cycle indicator and SACCI business confidence index, Indonesia’s value of loans and Bank of Indonesia’s interest rate decision, Germany’s manufacturing PMI, services PMI and composite PMI, Mexico’s mid-month inflation rate, Brazil’s IPCA-15 consumer price index, Canada’s manufacturing sales and wholesale sales, US Redbook index, services PMI, composite PMI, manufacturing PMI, new home sales, Richmond Fed composite manufacturing index, Richmond Fed fifth district service sector activity index, API crude oil stocks and Fed Chair Powell speech, as well as Argentina’s retail sales.

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