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Zoom Video Communications (ZM) Outpaces Stock Market Gains: What You Should Know

Zacks Equity Research

In the latest trading session, Zoom Video Communications (ZM) closed at $144.82, marking a +0.96% move from the previous day. The stock outpaced the S&P 500's daily gain of 0.9%. Elsewhere, the Dow gained 0.56%, while the tech-heavy Nasdaq added 1.13%.

Prior to today's trading, shares of the video-conferencing company had gained 16.67% over the past month. This has lagged the Computer and Technology sector's gain of 17.65% and outpaced the S&P 500's gain of 14.3% in that time.

Wall Street will be looking for positivity from ZM as it approaches its next earnings report date. This is expected to be June 2, 2020. On that day, ZM is projected to report earnings of $0.10 per share, which would represent year-over-year growth of 233.33%. Meanwhile, our latest consensus estimate is calling for revenue of $201.46 million, up 65.15% from the prior-year quarter.

For the full year, our Zacks Consensus Estimates are projecting earnings of $0.43 per share and revenue of $931.31 million, which would represent changes of +22.86% and +49.57%, respectively, from the prior year.

It is also important to note the recent changes to analyst estimates for ZM. Recent revisions tend to reflect the latest near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection remained stagnant. ZM currently has a Zacks Rank of #1 (Strong Buy).

Valuation is also important, so investors should note that ZM has a Forward P/E ratio of 331.65 right now. For comparison, its industry has an average Forward P/E of 42, which means ZM is trading at a premium to the group.

We can also see that ZM currently has a PEG ratio of 12.49. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. The Internet - Software industry currently had an average PEG ratio of 2.92 as of yesterday's close.

The Internet - Software industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 38, putting it in the top 15% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

To follow ZM in the coming trading sessions, be sure to utilize Zacks.com.

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Zoom Video Communications, Inc. (ZM) : Free Stock Analysis Report
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