Tuesday, November 23, 2021

Zoom Shares Under Pressure Despite Upbeat Q3 Print

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What’s happening: Shares of Zoom Video Communications, Inc. fell in extended trading on Monday, despite the company exceeding market expectations for the third quarter.

What happened: Zoom managed to surpass Street expectations for the quarter and also raised its full-year revenue forecast, despite facing tough year-over-year comparisons.

However, the stock remained under pressure due to concerns around slowing growth with a waning of demand for its services as companies and educational institutions get back to normal.

How were the results: The San Jose, California-based software maker reported higher earnings and sales for the third quarter, with both figures ahead of market views.

  • Revenue surged 35% year-over-year to $1.05 billion, beating the consensus estimate of $1.02 billion.
  • Earnings grew 12% to $1.11 per share, surpassing the Street expectations of $1.09 per share.

Why it matters: The covid-19 pandemic had provided a major boost last year to demand for the company’s videoconferencing software. Despite facing tough comps, Zoom managed to generate growth.

While Zoom’s revenues surged 35% year-over-year in the quarter ending October 31, this marked a meaningful deceleration from the 54% growth recorded in the earlier quarter and the 360% growth reported in the year-ago quarter.

Zoom said it had 512,100 customers with 10+ employees, which is up 18%. Its customers contributing more than $100,000 in the trailing twelve months jumped 94% year-over-year to 2,507, compared to 2,278 as of July 31.

Management guided to full year adjusted earnings between $4.84 and $4.85 per share, higher than the consensus estimate of $4.78 per share. The company also projected revenues in a range of $4.079 billion to $4.081 billion, compared to market expectations of $4.02 billion.

The company’s fourth-quarter guidance came in at adjusted earnings of $1.06-$1.07 per share on sales of $1.051-$1.053 billion. These figures were also ahead of Street projections of $1.05 per share in earnings on sales of $1.02 billion.

How shares responded: Zoom’s shares were volatile on Monday. The stock tumbled around 3.6% in regular trading session and then rose around 4% in late trading following the release of quarterly results. However, the company’s shares soon gave up gains to decline by 6.3% to $227.00 in after-hours trading. The stock has shed around 28% year to date.

What to watch: Investors will keep an eye on the company’s growth, amid stiffening competition from Cisco's WebEx and Microsoft's Teams.

The Markets Today

     

The British pound will be in focus today ahead of a basket of economic reports from the country.

Context: The GBP/EUR forex pair remained close to its highest levels since early 2020, while the GBP/USD fell on Monday.

Details: The US dollar strengthened on Monday, after President Joe Biden renominated Federal Reserve Chair Jerome Powell for a second four-year term. Markets were expecting either Powell or Fed Governor Lael Brainard for the position. Brainard was named as the Fed’s Vice Chairman.

The sterling lost around 0.25% versus the greenback on Monday, also tumbling to a ten-session low of around $1.3391, with the US dollar recording gains versus major peers following Powell’s renomination.

There continues to be uncertainty around whether the Bank of England will hike interest rates at its upcoming December meeting. The country’s central bank had surprised investors earlier this month by keeping rates unchanged. Meanwhile, UK’s inflation rate has climbed to a ten-year high of 4.2%.

The pound has added over 2% versus the euro after tumbling to a one-month low on November 5. The GBP/EUR pair briefly hit 83.80 on Monday, with the euro being under pressure after Austria announced plans to reimpose a nation-wide lockdown and Europe recording high covid-19 cases.

The GBP/USD forex pair settled at 1.3397, while GBP/EUR closed at 83.89 on Monday.

What to watch: Traders await the release of economic data on composite PMI, services PMI and manufacturing PMI from the UK today. The IHS Markit/CIPS manufacturing PMI is expected to decline slightly to 57.3 in November, from 57.8 in October, while the services PMI is projected to decline to 58.5 in November, from previous month’s 59.1.

Markets will also continue to monitor rising covid-19 cases, with total global infections surging to 258.3 million.

Other Markets: US indices closed mostly lower on Monday, with the S&P 500 and Nasdaq 100 down by 0.32% and 1.16%, respectively, and the Dow Jones index up by 0.05%.

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South Africa’s composite leading business cycle indicator, France’s composite PMI, services PMI and manufacturing PMI, Germany’s composite PMI, services PMI and manufacturing PMI, Eurozone’s composite PMI, services PMI and manufacturing PMI, Mexico’s retail sales, Canada’s manufacturing sales, America’s Redbook index, Richmond Fed manufacturing index, composite PMI, services PMI and manufacturing PMI, Brazil’s government revenues, Argentina’s leading economic index, balance of trade and monthly economic activity estimator.