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Zoom Video Communications (ZM) Gains But Lags Market: What You Should Know

Zacks Equity Research
·3-min read

Zoom Video Communications (ZM) closed the most recent trading day at $175.48, moving +1.04% from the previous trading session. This change lagged the S&P 500's 1.67% gain on the day. Elsewhere, the Dow gained 1.53%, while the tech-heavy Nasdaq added 2.08%.

Wall Street will be looking for positivity from ZM as it approaches its next earnings report date. This is expected to be June 2, 2020. The company is expected to report EPS of $0.10, up 233.33% from the prior-year quarter. Our most recent consensus estimate is calling for quarterly revenue of $203.02 million, up 66.42% from the year-ago period.

ZM's full-year Zacks Consensus Estimates are calling for earnings of $0.43 per share and revenue of $931.31 million. These results would represent year-over-year changes of +22.86% and +49.57%, respectively.

Investors should also note any recent changes to analyst estimates for ZM. These recent revisions tend to reflect the evolving nature of short-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

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Based on our research, we believe these estimate revisions are directly related to near-team stock moves. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. Over the past month, the Zacks Consensus EPS estimate remained stagnant. ZM currently has a Zacks Rank of #3 (Hold).

Looking at its valuation, ZM is holding a Forward P/E ratio of 401.57. For comparison, its industry has an average Forward P/E of 51.27, which means ZM is trading at a premium to the group.

Meanwhile, ZM's PEG ratio is currently 15.12. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. Internet - Software stocks are, on average, holding a PEG ratio of 3.07 based on yesterday's closing prices.

The Internet - Software industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 29, which puts it in the top 12% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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Zacks Investment Research