California-based Zoom Video Communications (NASDAQ:ZM) was a darling of the markets in 2020 as the Covid-19 pandemic accelerated the trend of working and collaborating remotely. As a result, ZM stock posted life-changing returns for well-timed investors.
A lot has happened during the past year. Vaccines are being distributed, and people are venturing outside of their remote work spaces. Does this mean that Zoom’s glory days are in the rear-view mirror?
Not necessarily. As we’ll see, one prominent analyst seems to suggest that the party isn’t over for Zoom and its stakeholders.
Or better yet, we don’t have to worry about parties and market darlings. Instead, we can focus on a premier remote communication platform with a business model that’s built to last, even post-pandemic.
ZM Stock at a Glance
The ZM stock price, which was trading at around $330 not long ago, might seem high. And indeed, the past year’s rally has been impressive.
Yet, traders should also bear in mind that the stock has gone significantly higher. To be more specific, on Oct. 19 of last year, the share price hit a 52-week high of $588.84.
The retracement should be viewed as natural, and understandable. We shouldn’t expect a stock to triple in price in a few months without some profit taking.
Besides, that initial rush of enthusiasm was, most likely, overdone.
Now, the runway has been cleared for the smart money to get in at a more favorable price point — and going forward, the ascent can be more measured and sustainable this time around.
No Slowing Down
A primary concern among Zoom’s skeptics is that re-openings may have caused a slowdown in the company’s business.
There’s no way to predict the future, but recently collected data from the past tends to indicate that fiscally speaking, Zoom is doing just fine during the re-opening.
For the company’s fourth fiscal quarter, Zoom posted stats that ought to convince even the die-hard doubters:
- $882.5 million in total revenues, up 369% year over year
- GAAP income from operations of $256.1 million, a massive 2,327% year-over-year increase
- Non-GAAP income from operations of $360.9 million, marking an improvement of 839% year over year
- Operating cash flow of $399.4 million was up 993% on a year-over-year basis
There were also some dazzling statistics for fiscal full-year 2020. However, I wanted to highlight the fourth quarter because the skeptics’ concerns might pertain to the company’s more recent fiscal performance.
In any case, posting triple- and even quadruple-digit growth in multiple areas ought to quell any worries about Zoom’s ability to execute as the nation attempts to return to some version of “normal.”
The Party Continues, Meaningfully
With numbers like these, the analysts have plenty of ammunition with which to justify their bullish upgrades and price targets.
For example, Keybanc’s Alex Kurtz observed Zoom’s “standout” quarter and raised his bull case from the already ambitious $603 to a slightly higher $610.
That’s a major vote of confidence for a stock that’s not too far from $300. Moreover, Kurtz maintained his “sector weight” rating for ZM stock.
Piper Sandler’s James Fish, meanwhile, declared that the party “is not over in comm software.” With that, Fish maintained his “overweight” rating and boosted his price target on Zoom from $501 to $541.
Maybe you’re not into parties. If so, then you might prefer Morgan Stanley analyst Meta Marshall’s characterization of Zoom’s earnings beat as “meaningful.”
Keeping her “equal-weight” rating on ZM stock, Marshall lifted her one-year price target on the shares from $390 to a very reasonable $420.
You might agree with any of these experts’ price projections, or none of them.
It’s hard to argue with the numbers, though. Even with the re-opening in progress, there’s an abundance of blockbuster fiscal data to justify a thoroughly bullish outlook for Zoom.
On the date of publication, Louis Navellier had a long position in ZM. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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