Zoom (NASDAQ: ZM) Will Be Able to Retain Its Current Strength Even After the Coronavirus (COVID-19) Pandemic Subsides, as per the Latest Optimistic Note From JP Morgan (NYSE: JPM)
Zoom (NASDAQ:ZM), the company that provides remote conferencing services, will be able to maintain its current growth trajectory even after the ongoing coronavirus (COVID-19) pandemic ends, as per the latest investment note from JP Morgan (NYSE:JPM). Due to this fairly optimistic view, the Wall Street behemoth maintained its ‘Overweight’ rating and a $150 price target for Zoom’s stock.
While citing data from the app intelligence provider Apptopia, JP Morgan noted that Zoom’s Daily Active Users (DAUs) have registered a whopping year-over-year increase of 378 percent. Similarly, the company’s Monthly Active Users (MAUs) are up around 190 percent due to the ongoing coronavirus pandemic and the attendant shift toward remote working as quarantines expand and increasingly stringent social distancing measures are instituted throughout the world.
JP Morgan analyst Sterling Auty opined in his latest investment note that Zoom will maintain its current explosive pace of growth even after the ongoing coronavirus pandemic loses potency as companies and businesses "will want to be prepared to handle [similar] disruptions in the future".
Auty further noted that business users are a key market segment for Zoom and that the remote working trend will continue to gain steam, thereby, allowing the company to pull “away from the competition".
Bear in mind that JP Morgan had penned another investment note earlier in March and that its latest note strikes a decidedly cheerful tone as compared to the previous one. As an illustration, the key Wall Street player had conceded at the time that the pandemic was driving an increased uptake in Zoom’s free app but cautioned that it remained unclear if those free users could be translated into paid subscriptions.
Nonetheless, in early March, JP Morgan had praised Zoom for removing time caps for free users on its app in Asia and observed that the step made strategic sense:
“Ultimately, getting more people to try the solution we believe will lead to even better long-term market penetration.”
In addition, JP Morgan’s Sterling Auty had identified the ‘Zoom Phone’ as a key growth driver in his earlier note given that the service continues to attract customers and maintains a healthy operating margin of 20.4 percent.
As a refresher, Zoom reported a net income of $15.3 million – 5 cents per share – in the fourth quarter of 2019. This marked an astonishing annual increase of 1,175 percent when compared with the $1.2 million that the company earned in the applicable quarter of 2018. Similarly, the company’s revenue for the quarter surged by 78 percent on an annual basis to $188.3 million. Zoom’s full-year revenue computed at $622.7 million, registering a year-over-year increase of 88 percent. For the first quarter of 2020, the company expects to earn between $199 million and $201 million in revenue.
The company has attracted a fair amount of attention from investors ever since its NASDAQ debut last year. Year to date, Zoom’s stock has provided gains of 122.96 percent (based on Friday’s closing price). For comparison, the NASDAQ 100 index has tumbled by 14.25 percent in the same timeframe. As of 11:34 a.m. ET, the stock is trading at $157.80, marking a daily jump of 4.08 percent.
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