Zoom Video Communications (ZM +0.79%) is slated to report its first-quarter results for fiscal 2021 after the market close on Tuesday, June 2.
Investor expectations are high. Investors have driven shares of the unified-communications platform provider up 54% since its last quarterly report was released on March 4. The S&P 500 has returned negative 2% over this period. In 2020, Zoom stock is up 164% -- while the broader market is down about 5% -- making it one of best-performing "coronavirus stocks."
Indeed, investor optimism stems largely from the COVID-19 pandemic. The global crisis has caused a surge in the number of people working from their homes due to U.S. states and many countries issuing shelter-in-place orders to help slow the spread of the virus. This dynamic, in turn, has driven demand by businesses and other entities for Zoom's communications products to enable their employees to work from home.
Image source: Zoom Video Communications.
Zoom Video's key numbers
Here are Zoom's results for the year-ago period and Wall Street's estimates to use as benchmarks.
| Metric | Fiscal Q1 2020 Result | Fiscal Q1 2021 Wall Street Consensus Estimate | Projected Growth YOY |
|---|---|---|---|
| Revenue | $122 million | $202 million | 66% |
| Adjusted earnings per share (EPS) | $0.03 | $0.09 | 200% |
Data sources: Zoom Video Communications and Yahoo! Finance. YOY = year over year.
Zoom management guided for adjusted EPS of $0.10 on revenue of $200 million. This outlook is likely to prove too conservative, perhaps considerably so. Management issued this guidance on March 4 -- that was a week before the World Health Organization (WHO) declared the coronavirus epidemic a pandemic and before any U.S state and many countries began issuing lockdown orders.
For context, in the prior quarter, Zoom's revenue soared 78% year over year to $188.3 million. Net income based on generally accepted accounting principles (GAAP) landed at $15.3 million, or $0.05 per share, compared with $1.2 million, or $0.01 per share, in the year-ago quarter. On an adjusted basis, net income was $43.2 million, up from $10.0 million in the year-ago period, which translated into earnings per share surging 275% to $0.15.
Wall Street had been looking for adjusted EPS of $0.07 on revenue $176.6 million. So the company easily beat the top-line expectation and crushed the profit estimate.
Update on improving privacy and security measures
In April, Zoom received a spate of negative press stemming from inadequacies in its privacy and security measures, which enabled bad actors to hack into supposedly secure videoconferences, among other things.
Investors can expect management to discuss on the earnings call what actions it has taken to beef up the privacy and security of its platform.
Guidance is key
The market looks ahead. So Zoom's guidance, relative to Wall Street's expectations, will probably be the biggest factor in the stock's reaction to the upcoming release.
For Q2, analysts are modeling for adjusted EPS of $0.11 on revenue of $222.4 million, representing growth of 38% and 53%, respectively, year over year.
Given Zoom issued its guidance for the full fiscal year just before the coronavirus crisis exploded, investors can likely expect management to raise its full-year outlook -- at least for revenue. That said, it's possible that Zoom will simply pull its previously issued full-year guidance, citing uncertainty surrounding the pandemic.
For the full fiscal year, Zoom has guided for revenue of $905 million to $915 million, which, at the midpoint, represents growth of 46% year over year. It also expects adjusted EPS to be between $0.42 and $0.45, representing growth of 20% to 29% year over year.
