Zoom Video Communications Inc

Zoom Video Communications, Inc. (NYSE: ZM) is a provider of video communication platforms. The Company provides a unified communications and collaboration platform that delivers fundamental changes how people interact, connecting them through frictionless and secure meetings, phone, chat, content sharing and more. The Company’s core products are grouped under various categories: Zoom One, including Zoom Meetings, Zoom Phone, Zoom Team Chat, Zoom Mail and Calendar and Zoom Whiteboard, and Zoom Spaces, including Zoom Rooms and Workspace Reservation.

Recent Financial and Business Updates:

Financial Results Highlights:

• Revenue: In the second quarter, total revenue increased to USD 1,138.7 million, up by 3.6% year over year, while in the first quarter, total revenue was USD 1,105.4 million, showing a 3% year-over-year increase. Adjusted for foreign currency effects, revenue in constant currency also increased in both quarters, with the second quarter at 4.5% and the first quarter at 5%. However, there was a notable difference in the performance of Enterprise and Online revenue. Enterprise revenue increased by 10.2% year over year in the second quarter but only by 13% in the first quarter, while Online revenue decreased by 4.3% year over year in the second quarter and 8% in the first quarter.
• Income from Operations and Operating Margin: GAAP income from operations increased significantly in the second quarter to USD 177.6 million, compared to USD 9.7 million in the first quarter. After adjusting for various expenses, non-GAAP income from operations also showed significant growth, with the second quarter at USD 461.7 million and the first quarter at USD 422.3 million. The GAAP operating margin in the second quarter was 15.6%, while in the first quarter, it was only 0.9%. Non-GAAP operating margin showed a substantial improvement in the second quarter at 40.5%, whereas it was 38.2% in the first quarter.
• Net Income and Diluted Net Income Per Share: GAAP net income attributable to common stockholders in the second quarter was USD 182.0 million, compared to USD 15.4 million in the first quarter. The diluted net income per share in the second quarter was USD 0.59, while in the first quarter, it was USD 0.05. Non-GAAP net income also increased significantly from USD 353.3 million in the first quarter to USD 409.6 million in the second quarter. The non-GAAP net income per share improved from USD 1.16 in the first quarter to USD 1.34 in the second quarter.
• Cash and Marketable Securities: Total cash, cash equivalents, and marketable securities increased in both quarters, with USD 6.0 billion as of July 31, 2023, and USD 5.6 billion as of April 30, 2023.
• Cash Flow: Net cash provided by operating activities increased in the second quarter to USD 336.0 million, compared to USD 418.5 million in the first quarter. Free cash flow also showed an increase, with the second quarter at USD 289.4 million and the first quarter at USD 396.7 million.
• Customer Metrics:
• Factors affecting total revenue included the acquisition of new customers and the expansion of services among existing customers. At the end of the second quarter of fiscal year 2024, Zoom reported the following:
• Approximately 218,100 Enterprise customers, indicating a 6.9% increase from the same quarter in the previous fiscal year.
• An exceptional trailing 12-month net dollar expansion rate of 109% for Enterprise customers.
• 3,672 customers generated over USD 100,000 in trailing 12-month revenue, a significant increase of about 17.8% from the same quarter in the previous fiscal year.
• Online average monthly churn rate of 3.2% in the second quarter, showing a 40-basis points reduction from the same quarter in the previous fiscal year.
• A noteworthy 72.8% of the total Online Monthly Recurring Revenue (MRR) came from Online customers who maintained a service term of at least 16 months, signifying a 340 basis points increase year over year.

• Financial Outlook:
• Third Quarter Fiscal Year 2024: Anticipated total revenue falls within the range of USD 1.115 billion to USD 1.120 billion, with constant currency revenue expected to range between USD 1.117 billion and USD 1.122 billion. Non-GAAP income from operations is projected to range from USD 400.0 million to USD 405.0 million. The expected range for non-GAAP diluted EPS is USD 1.07 to USD 1.09, based on approximately 309 million weighted average shares outstanding.
• Full Fiscal Year 2024: Anticipated total revenue is within the range of USD 4.485 billion to USD 4.495 billion, with constant currency revenue expected to range between USD 4.516 billion and USD 4.526 billion. Full fiscal year non-GAAP income from operations is projected to range from USD 1.685 billion to USD 1.695 billion. The expected range for full fiscal year non-GAAP diluted EPS is USD 4.63 to USD 4.67, based on approximately 308 million weighted average shares outstanding.
  

Technical Observation (on the daily chart)

Presently, the stock has corrected by approximately 29.43% since reaching its highest point in the past 52 weeks, which occurred on November 11, 2022. The Relative Strength Index (RSI) over a 14-day period stands at 36.36 currently near the oversold zone, indicating a state of potential consolidation. Additionally, the stock's current positioning is below both the 21-day Simple Moving Average (SMA) and the 50-day SMA, which may serve as dynamic short-term resistance levels.  

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing. 

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

How to Read the Charts?

The yellow colour line reflects the 21-period simple moving average (SMA) while the blue line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The orange colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The red and green colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps with easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

The reference date for all price data, currency, technical indicators, support, and resistance levels is October 18, 2023. The reference data in this report has been partly sourced from REFINITIV. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by individual. Technical reports in general chart out metrics that may be assessed by individuals before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.

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