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StockBeat: Zoom Earnings-Beat Takes Backseat to Valuation Concerns

Investing.com - Zoom Video Communications shares fell Friday as its earnings beat in the second quarter and raised guidance did little to offset fears about the company’s lofty valuation.

For the full-year 2020, Zoom Video Communications Inc. (NASDAQ:ZM) lifted its earnings per share to a range of $0.18 to $0.19 on sales of $587 million to $590 million, above an earlier estimate for earnings per share of $0.02 to $0.03 on revenue of between $535 million and $540 million.

With shares of Zoom boasting gains of nearly 250% since going public at $36, the upbeat forecast was brushed off, with Credit Suisse (SIX:CSGN) maintaining its neutral rating on the company, flagging a frothy valuation. Zoom Video shares fell nearly 4%.

“We remain neutral, due to ZM’s premium valuation and embedded high expectations,” Credit Suisse (SIX:CSGN) said in a note.

Zoom Video’s guidance boost for the fiscal year was underpinned by better-than-expected earnings on both the top and bottom lines.

The company reported fiscal-second-quarter earnings of 8 cents a share on revenue of $145.8 million, above consensus estimates from Investing.com for earnings of 1 cent a share on revenue of $130.3 million.

A rise in both customer additions and expansions supported the uptick in revenue, with the company adding a record 7,800 net new customers in the quarter. In the first quarter, Zoom said it earned 3 cents a share on revenue of about $123 million.

Looking ahead, Credit Suisse (SIX:CSGN) said it expected Zoom Phone – a unified app for phone, video, meetings, and chat – to build on its success, driving further users to the platform.

“Though it is still early innings, we believe existing customer interest into Zoom Phone’s differentiation as signs of potential future success among Zoom’s existing customer base,” Credit Suisse (SIX:CSGN) said. "Additionally, we believe potential new partnerships with those such as Verizon (NYSE:VZ) could drive further uptake for Zoom Phone and the overall Zoom UCaaS platform.”

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