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

Zacks Equity Research
·3 min read

Zoom Video Communications (ZM) closed at $453 in the latest trading session, marking a -1.72% move from the prior day. This change lagged the S&P 500's 1.23% gain on the day. Meanwhile, the Dow gained 1.6%, and the Nasdaq, a tech-heavy index, added 0.42%.

Coming into today, shares of the video-conferencing company had lost 4.57% in the past month. In that same time, the Computer and Technology sector lost 1.34%, while the S&P 500 lost 2.51%.

ZM will be looking to display strength as it nears its next earnings release. The company is expected to report EPS of $0.75, up 733.33% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $694.51 million, up 316.9% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $2.48 per share and revenue of $2.40 billion, which would represent changes of +608.57% and +285.82%, respectively, from the prior year.

Investors might also notice recent changes to analyst estimates for ZM. Recent revisions tend to reflect the latest near-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

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.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. Within the past 30 days, our consensus EPS projection has moved 7.17% higher. 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 185.65 right now. For comparison, its industry has an average Forward P/E of 79.25, which means ZM is trading at a premium to the group.

Also, we should mention that ZM has a PEG ratio of 7.43. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. The Internet - Software industry currently had an average PEG ratio of 6.46 as of yesterday's close.

The Internet - Software industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 163, which puts it in the bottom 36% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Make sure to utilize Zacks. Com to follow all of these stock-moving metrics, and more, in the coming trading sessions.


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Zacks Investment Research