Zoom Video Communications (NASDAQ:ZM) was arguably the biggest winner of the stay-at-home economy brought on by the COVID-19 pandemic. The company went from being a popular virtual meeting platform to being the way that hundreds of millions of people did their jobs and stayed in touch with friends and family.
However, what will happen now that life in the U.S. is getting back to normal? While we’re still more than a month away from Zoom’s next earnings release, here’s what Fool.com contributor Brian Feroldi will be watching, as he discusses the company in this July 1 Fool Live clip.
Brian Feroldi: I will say that one company that I’m particularly interested in listening to is Zoom. Zoom not only is a fascinating growth company, but that stock has been under a lot of pressure over the last eight months, nine months because everybody thought it was going to grow to infinity and now it’s only growing triple digits. Boo hoo hoo, the valuation got way out insane, now it’s come back to earth. But what I found fascinating about Zoom is just in the last week. In fact, two days ago, it acquired a company called Kites GmbH, which is a real-time machine learning solutions for transcription. Theoretically, we could have transcripts of what we’re saying live on Zoom in the not-too-distant future. That’s pretty cool. They also launched a new phone application. It’s a hardware solution that’s designed to meet the hybrid workforce. If you’re an employee and you need some of you to work at home, some of you to work in the office, there’s this new Zoom phone that you can put on your desktop and it has all the capabilities of Zoom built right into this hardware. It makes it easy to take phone calls, to do interactions, to do Zoom and everything like that. That sounds great. That’s an issue as the optionality of this platform. It’s not just a video company, it’s a communications company. Is that having success? It’s possible. But more importantly than any of that is, this company is still in hypergrowth mode. Last quarter they reported revenue growth of 191%, earnings went bonanza. They are up like nine fold. The number of customers that were spending $100,000 or more, grew 160%. Everything about these companies have thesis on track. But Wall Street is, what have you done for me lately business. It’s going to be curious to see what they think of growth for the rest of the year and more importantly growth next year when everything is normalized. But for what it’s worth, Wall Street is still expecting, I think 51% revenue growth next year. If I’m reading that right, unless they have that wrong.
Brian Withers: It’s 50% year-over-year as it goes up to $4 billion.
Feroldi: This year, and then about 20% next year. That sounds like this is on track to me. Yeah, so I’ll be curious to hear what they have to say.
Withers: That Kites acquisition. They may do transcription, I wasn’t sure about that, but it’s translation so it’s language translation.
Feroldi: Oh translation, excuse me.
Withers: I think that’s super cool for international meetings and things like that. They had offered translation services, but it was through translators that would come onto your conference call. To do this in real-time on the Zoom, I think that’s just going to be super cool.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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