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With Zoom Down Double Digits, Investors May Want to Relook at the Stock

By Brian Withers and Matthew Frankel, CFP® - Mar 12, 2021 at 7:36AM

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This video platform is firing on all cylinders.

Zoom (ZM -1.32%) stock has been a Wall Street darling during the pandemic. But with recent fears that the vaccine will impact its popular video platform's growth, the share price is down around 40% from its all-time high. Is this an opportunity for long-term investors to take a bite of the stock, or are the naysayers right?

On a Fool Live episode recorded on March 3, Fool contributors Brian Withers and Matt Frankel go over Zoom's most recent results, which might encourage investors to take another look at this growth stock. 

Brian Withers: Zoom stock is down almost 40 percent from its 52-week high. There wasn't much news other than they announced earnings on Monday, which was absolutely fantastic. You may have seen some of the headlines. Rather [than] covering the year-over-year numbers, I want to cover the quarter-over-quarter numbers. This is Q3 to Q4, their revenue went up 17 percent. As businesses start to normalize and whatnot, they're still capturing new revenue from existing customers and they're capturing new customers.

This one I really like, 100K customers who are spending $100,000 annually went up 28 percent from Q3 to Q4. Just imagine if you could do that over the course of four quarters, you'd be doubling the number of $100,000 customers over the course of a year. That's just fantastic. It's not [just] single-digits either, it's 1,644 customers, so it's quite a bit. Overall, customers went up eight percent quarter-over-quarter.

 This one, this stat is just amazing to me. A hundred and thirty percent dollar-based net revenue retention. Customers last year spent $100, this year, they're spending 130 [dollars] or more. That's the 11th quarter in a row that they've seen over 130 percent in this net revenue number.

International has grown to 33 percent of its business versus 20 percent a year ago. The numbers go on and on, $2.25, full-year earnings per share, four billion in cash.

Now, they're looking at 2022, their next fiscal year, at only 42 percent growth, so people were disappointed. To me, that's absolutely amazing, considering they're trying to guess how businesses are coming back to work and doing that. But they've seen tremendous attachment or adoption of their Zoom phone. Even over the last quarter, they've been selling Zoom Phones as solutions for businesses as they get back to work. They only have 14 percent of the global 2,000, and they're going to expand in existing customers.

So I'm watching how Zoom continues to innovate and adapt as the workplace goes back to being, I'm thinking they're going to end up in a hybrid work environment. But they have some cool products like Zoom Rooms, Virtual Receptionists, and lots of cash to give them plenty of optionality.

Matthew Frankel: Yes, I love Zoom. Like today, you mentioned when you just talked about Shopify, Zoom also raised capital this past quarter. They raised, I think 1.75 billion [dollars] earlier this year at a valuation that was 10 times their IPO price. [laughs] That's a pretty impressive capital raise.

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Stocks Mentioned

Zoom Video Communications Stock Quote
Zoom Video Communications
$89.74 (-1.32%) $-1.20
Shopify Inc. Stock Quote
Shopify Inc.
$363.85 (-7.02%) $-27.48

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