What Happened:
Shares of video conferencing platform Zoom (NASDAQ:ZM) jumped 9.53% in the pre-market session after the company reported a "beat and raise" quarter. First quarter results exceeded analysts' expectations for revenue, free cash flow, and adjusted operating income. Earnings per share (EPS) also beat by an impressive 17%. It was also good to see gross margin improve. Guidance was solid, with next quarter's revenue and adjusted operating profit guidance both slightly ahead. Additionally, full year revenue and adjusted operating profit guidance were both raised and came in ahead of Consensus, which was a big bright spot. On the other hand, it was unfortunate to see the slowdown in new contract wins and the revenue retention rate deteriorated. Another negative is the slowdown in the Enterprise business. Overall, it was a solid quarter for Zoom Video. Following the results, MoffettNathanson analyst upgraded the stock's rating from Underperform (Sell) to Market Perform (Hold). After the initial pop the shares cooled down to $66.34, down 7.2% from previous close.
What is the market telling us:
Zoom Video's shares are quite volatile and over the last year have had 30 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. The previous big move was 29 days ago, when the company gained 5.75% on the news that Rosenblatt Securities analyst initiated coverage on the stock with a Hold rating and a price target of $75.
Zoom Video is down 0.9% since the beginning of the year, and at $66.34 per share it is trading 45.9% below its 52-week high of $122.64 from June 2022. Investors who bought $1,000 worth of Zoom Video's shares at the IPO in April 2019 would now be looking at an investment worth $1,070.
Is now the time to buy Zoom Video? Access our full analysis of the earnings results here, it's free.