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Zoom Earnings on Monday: Will They Keep the Stock's Coronavirus-Fueled Surge Going?

By Beth McKenna - Nov 28, 2020 at 10:01AM

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Zoom Video's stock has soared 45% since its last quarterly report, so the videoconferencing specialist has a lot to prove when it reports its fiscal Q3 results.

Zoom Video Communications ( ZM -4.84% ) is slated to report its third quarter results for fiscal 2021 after the market close on Monday, Nov. 30.

The videoconferencing specialist is zooming toward its release on a powerful note. Since the COVID-19 pandemic started, its results have gotten a huge boost from the surge in people working, learning, and socializing from home.

In 2020, Zoom stock has skyrocketed 593% through Nov. 27. The S&P 500 has returned 14.5% over this period.

Middle-aged man in front of computer screen showing 12 people's faces.

Image source: Getty Images.

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 Q3 2020 Result Fiscal Q3 2021 Wall Street Consensus Estimate Projected Growth YOY
Revenue $166.6 million $694 million 317%
Adjusted earnings per share (EPS) $0.09 $0.76 744%

Data sources: Zoom Video Communications and Yahoo! Finance. YOY = year over year. Zoom's fiscal Q3 ended in late October.

Zoom management guided for revenue between $685 million and $690 million. It also expects adjusted EPS to be between $0.73 and $0.74. 

Collectively, Wall Street is doing close to the same thing with respect to its estimates as it's been doing for some time, despite that working out poorly. Here's my explanation from last quarter's earnings preview:

It's interesting that Wall Street is essentially "only" using Zoom's guidance as its estimates. [Unlike last quarter, the consensus estimates are both higher than the upper range of management's guidance range -- but not by much.] Companies nearly always are conservative in setting guidance, especially companies whose stock prices sport nosebleed valuations. Analysts know this, so often adjust their estimates upward of a company's guidance, or guidance range. (That said, Wall Street did a terrible job last quarter projecting the company's top- and bottom-line results, as we'll get to in a moment, so perhaps this isn't too surprising.) 

I was correct last quarter with this opinion and am going with it again this quarter: "It seems highly likely that Zoom will beat the Street's expectations on both the top and bottom lines."

For context, in its fiscal second quarter, Zoom's revenue soared 355% year over year to $663.5 million, crushing the $500.5 million Wall Street consensus estimate. Adjusted for one-time items, earnings per share rocketed 1,050% to $0.92, or about double the $0.45 that analysts had been expecting.

Zoom has sailed by the Street's earnings estimates in every quarter since its April 2019 initial public offering (IPO).

Guidance is key 

Investors generally view the future as more important than the past. So the market's reaction to Zoom's release of its results will probably hinge more on management's guidance than on fiscal third quarter results, relative to Wall Street's expectations. 

So you'll want to know what analysts are currently expecting for the fiscal third quarter:

  • Revenue of $730.1 million, representing growth of 288% year over year.
  • Adjusted EPS of $0.66, representing growth of 340% year over year.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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