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Zoom (ZM) Reaches 1M Zoom Phone Seats Sales in Under 2 Years

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Zoom Video Communications (ZM - Free Report) recently announced that it has achieved sales of one million Zoom Phone seats in less than two years of its launch, entering a crowded enterprise telephony service field.

Zoom Phone is an enterprise-focused communications platform available on the Zoom Pro tier that complements Zoom Meetings, Zoom Chat, Zoom Rooms, and Zoom Video Webinars. The cloud service can be used for domestic calls in 44 countries and territories worldwide for central telephone management, call routing, and contact center operations.

The company is benefitting from massive increase in demand for its cloud-native video-first platform which is expected to remain solid owing to the work-from-home and online-learning wave. This bodes well for Zoom shares, which have surged 373.9% in the past year, outperforming the Zacks Internet - Software industry’s rally of 96.6% in the same period.

One Year Performance

User Growth, Portfolio Expansion to Aid Zoom in 2021

Zoom is benefiting from an expanding enterprise customer base backed by its cloud-native unified communications platform. Its solutions combines video, audio, phone, screen sharing and chat functionalities make remote-working and collaboration easy.

Markedly, Zoom is one of the leading names in the unified communications and collaboration (UC&C) space, which is expected to witness a healthy CAGR of 27.8% during 2020-2025, per Mordor Intelligence report.

Moreover, per a report from Grand View Research, the video conferencing market is expected to reach $8.56 billion by 2027 witnessing a CAGR of 9.9% between 2020 and 2027.

Zoom has had to quickly expand and tighten up its operations since March 2020, when demand for its services increased, improve security and introduce features to tackle issues such as Zoombombing.  

Moreover, the launch of Zoom From Home solutions is expected to help the company maintain its existing enterprise user base and attract more customers. As of Oct 31, 2020, Zoom Video had roughly 3433,700 customers (with more than 10 employees), which soared 485% year over year. The stock has become an investor favorite and witnessed a surge of 496.7% on a year-to-date basis.

Additionally, the company had 1289 customers (with more than $100,000 in trailing 12-month revenues), up 136% year over year. The company’s growing enterprise customer list includes ExxonMobil and Activision Blizzard.

Apart from remote workers and online educators, Zoom’s solutions are rapidly being adopted by telehealth providers. Remote diagnosis is helping them adhere to social-distancing norms without compromising patient healthcare.

Intensifying Competition: A Growing Concern

User addition and portfolio expansion are being hailed as key catalysts for Zoom to continue on its growth trajectory in 2021. However, the company is facing stiff competition from Cisco’s (CSCO - Free Report) Webex as well as bundled productivity solutions with video functionality from Microsoft (MSFT - Free Report) and Alphabet (GOOGL - Free Report) -owned Google G Suite.

Markedly, integration of Teams with Microsoft’s various in-house offerings including PowerPoint presentations, SharePoint, Stream and Dynamics 365 make collaboration easy and engaging, while driving outcomes and saving time. Markedly, Teams has a daily active user base of 115 million as of first-quarter fiscal 2021.

Both Microsoft Teams and Cisco’s Webex have added noise cancellation software and started offering live transcription in video calls. Additionally, Webex is well poised to enhance Webex Assistant service with AI-based voice recognition and transcription capabilities from the Voicea acquisition.

Moreover, Zoom’s current momentum will likely be difficult to sustain in 2021 as a sizable chunk of employees are expected to return to office, per a report from real estate firm JLL, cited by CNBC. Markedly, three in four workers want to join office when the coronavirus-led health risks subside. In fact, a hybrid model that includes a couple of days of work from home is likely to be popular among employees.

Nonetheless, expanding upon new potential revenues streams, this Zacks Rank #3 (Hold) company rolled out Zoom Rooms and products like OnZoom, a video events platform that enables people to sell tickets, and Zoom Apps — which lets people navigate to other workplace apps like Dropbox and Slack within Zoom.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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