Zoom's stock surges on Q1 earnings, Warner Music Group returns to IPO markets
Warner Music Group priced its IPO at $25 a share on Wednesday. Yahoo Finance’s On The Move panel discusses. Meanwhile, Zoom’s shares skyrocketed after the company released its first quarter earnings report. Yahoo Finance’s On The Move panel weighs in.
Video Transcript
ADAM SHAPIRO: All right, welcome back to Yahoo Finance "On The Move." We want to talk about the IPO market and, of course, Warner Music, which is pricing at $25, although it's indicated open at $26 a share. They're going to raise close to $2 billion today. Julie Hyman, we talked yesterday about the IPO market coming back, and it looks like we might be off to the races.
JULIE HYMAN: We could be. I mean, the company also selling-- adding to the number of shares that it was selling. So we're awaiting those shares to start trading to see what the actual demand in the market looks like. It's also been interesting, of course, also since there were not people on the floor-- or now not as many people on the floor at the New York Stock Exchange-- how these IPOs go.
And then on the flip side, of course, there is sort of a poster child for successful IPOs that's out there today that may be giving hope to some of these new IPOs. And that's Zoom, whose shares are not necessarily reacting that well to the earnings, but it has seen enormous growth this year in the stock and enormous growth in users as we all have been talking to each other via video from home.
ADAM SHAPIRO: Akiko, when you look at the IPO market, you know, it's not just Warner Music we're looking at. We're going to have more tomorrow. I mean, the discussion a year ago would have been are things actually valued appropriately. Today, it seems as if investors do have things valued more in sync with reality.
AKIKO FUJITA: Yeah, I mean, that's certainly true. But I think it is interesting that we haven't necessarily seen this pipeline dry up. You know, we were having a conversation with Nelson Griggs, who's the president of the NASDAQ stock exchange, last week saying, we've got a pretty tight window when you look at where the opportunities are for companies that are coming to market. Because while we are seeing sort of the economic downturn and the knock-on impact from COVID, at the same time, you know, these companies are looking at what's coming up in November. And a lot of them want to come to market before that political risk kicks in. So I think that's something to think about.
I do think it's interesting still, though, when you look at IPOs and how they have all been conducted, no sort of typical roadshow. We've seen it all move online. And you have to wonder, how much of what we're seeing right now is going to be permanent, at least in the way that these things are going to be playing out in the markets.
ADAM SHAPIRO: Julie?
JULIE HYMAN: Yeah, I just wanted to chime back in on Zoom a little bit, as something that's a relatively recent IPO, right? Because that company's earnings, to me, were quite interesting. Even though the company doesn't give all of its subscribers, it does give some metrics here. So it had 769 customers paying over $100,000 in the trailing 12 months at the end of the fiscal first quarter. That's a 90% gain in those high-ticket customers.
At the same time, the thing that really seems to be damaging Zoom stock today, in addition to the fact that it has just about tripled this year, is the gross margin. It was spending more to keep the wheels on the bus, so to speak, to keep all of those calls that it was conducting over its network going smoothly. So gross margin narrowed significantly. 68.4% is the gross margin. It had been 82.7% the prior quarter. And that's because it added cloud and computing capacity.
So again, as we look at the IPOs that are coming to market, this is a company that makes money and that is showing growth. And I think that for those who are looking to buy into some of these new IPOs, those metrics are still-- I think we-- I don't know if we have entirely moved past the model of who cares about losses, but this is a company that shows that as a brand new company, you can make your way to profitability.
