Zoom Video Communications (ZM 3.49%) is slated to report its fourth quarter and full-year results for fiscal 2020 after the market close on Wednesday, March 4.
The provider of a video-first unified-communications platform is approaching its earnings release on a strong note. In each of its three quarters as a public company -- Zoom held its initial public offering (IPO) last April -- it's crushed Wall Street's profit expectations.
Moreover, after pulling back in the latter part of last year, its stock has zoomed up 49.6% in 2020 through Friday, Feb. 21, compared to the S&P 500's 3.6% return over this period. This run lifted the stock to an all-time high last week. With this type of recent gain and its lofty stock valuation -- the forward price-to-earnings ratio is 339 -- Zoom needs to deliver on fourth quarter results and guidance if it doesn't want its stock to plunge.
As to Zoom stock's 2020 surge, we can attribute it in sizable part to the novel coronavirus that was first officially identified in China in December. Businesses across the world are increasingly pulling out of industry conferences and other large international gatherings, which some investors are betting should increase demand for Zoom's videoconferencing offering.
Zoom Video's key quarterly numbers
Here are last quarter's results and Wall Street's estimates to use as benchmarks. (The usual year-ago results aren't provided here because the company wasn't publicly traded a year ago, so those results weren't publicly released.)
| Metric | Fiscal Q3 2020 Result | Fiscal Q4 2020 Wall Street Estimate | Projected Growth (Sequential, or QOQ) |
|---|---|---|---|
| Revenue | $166.6 million | $176.5 million | 5.9% |
| Adjusted earnings per share (EPS) | $0.09 | $0.07 | (22%) |
Data sources: Zoom Video Communications and Yahoo! Finance. QOQ = quarter over quarter.
Yes, Wall Street is expecting earnings to come in lower than last quarter. However, since the company is three-for-three in demolishing analysts' bottom-line expectations since its IPO, it seems a good bet that it will at least easily beat, if not blow away, that $0.07 adjusted EPS estimate.
The Street based its estimates off of Zoom's guidance. The company guided for fourth-quarter revenue between $175 million and $176 million, and adjusted EPS of approximately $0.07.
For context, in the third quarter, revenue soared 85% year over year to $166.6 million. Growth was driven by new customer wins and the expansion of services provided to existing customers. Net income was $2.2 million, or $0.01 per share, compared to a net loss of $0.6 million, or $0.01 per share, in the year-ago period.
Adjusted for one-time items, net income landed at $25.2 million, or $0.09 per share, up from net income of $2.1 million, or $0.01 per share, in the year-ago quarter. Wall Street had been expecting adjusted EPS of $0.03 on revenue of $156 million, so the company crushed the bottom-line estimate and comfortably exceeded the top-line expectation.
For additional context on revenue growth, in the first and second quarters, revenue surged 103% and 96%, respectively, year over year. So, while year-over-year revenue growth is still powerful, it has been decelerating.
Coronavirus impact
On the analyst live webinar, it seems likely that management will comment on the coronavirus' effect on the company's business. The webinar is scheduled to follow the earnings release on Wednesday, March 4, at 5:30 p.m. EST.
2020 guidance
Since the market is a forward-looking machine, Zoom Video's stock price movement following the earnings release will likely hinge more on the company's outlook than its fourth quarter results, relative to Wall Street's expectations.
Zoom management will probably continue to provide both a quarterly and annual outlook. So, you should know that analysts are modeling for the following:
- Fiscal Q1 2021: Adjusted EPS of $0.06 on revenue of $185.7 million. This represents growth of 100% and 66%, respectively, year over year.
- Full-year fiscal 2021: Adjusted EPS of $0.30 on revenue of $866.7 million.
