By Senad Karaahmetovic
Zoom Video Communications (NASDAQ:ZM) reported the slowest quarterly revenue growth on record to send its shares almost 9% lower in pre-market Tuesday.
Zoom crushed the analyst consensus of $0.83 for third-quarter EPS after reporting $1.07. Revenue came in at $1.10 billion, slightly ahead of the $1.09 consensus. Still, revenue growth year-over-year was just 4.9% - the slowest on record.
Zoom also reported its number of enterprise customers rose by 2.5% to 209,300, missing the Bloomberg average estimate of 210,105. The number of customers contributing more than $100,000 in the trailing 12 months revenue grew by 31% to 3,286.
"Our customers are increasingly looking to Zoom to help them enable flexible work environments and empower authentic connections and collaboration. Proactively addressing these needs with Zoom's expanding platform continues to be our focus in this dynamic environment," said Zoom Founder and Chief Executive Eric S. Yuan.
For this quarter, Zoom said it sees EPS between $0.75 and $0.78, missing the consensus of $0.80. Zoom is projecting flat quarter-to-quarter growth, or $1.10 billion in Q4 revenue, missing the analyst consensus of $1.12 billion.
For the full-year 2023, the company sees EPS between $3.91 and $3.94 on revenue between $4.37 and $4.38 billion. This compares to the analyst consensus that called for EPS of $3.70 on revenue of $4.39 billion.
Sell-side analysts lowered numbers on Zoom stock as they believe negative sentiment is unlikely to lift as the overall business continues to slow.
MoffettNathanson analysts argue that the “turn is still quarters away.” As a result, they cut the price target to $80 per share.
“The third quarter earnings did not bring to light anything radically new. But there are breadcrumbs being laid to get a sense of when the overall growth of the business might inflect, and, if all goes well, that is still three quarters into the future. However, it is not completely clear if a worsening macro environment (layoffs) would extend the timeline to a turn, or just result in a lower growth rate prior to the turn,” the analysts said in a client note.
Piper Sandler analysts also slashed the price target as he went to $77 from the prior $84 per share.
“In our view, Zoom needs to look beyond Meetings and invest faster (including inorganically via its >$5B cash) in other markets for that 'consolidation' theme, as sustainable growth is likely at-best in the low to-mid-single digits and Zoom faces a per-user pricing model headwind with this macroenvironment,” they wrote.
The analysts added they prefer other names within the Communication Software, hence their Neutral rating is maintained.