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Buy Zoom (ZM) Stock Before Q1 Earnings for Coronavirus Growth?

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Zoom Video Communications (ZM - Free Report) was one of the first superstar coronavirus stocks and it has remained a stay-at-home standout. So should investors consider buying ZM stock with the video conferencing firm set to report its first quarter fiscal 2021 financial results after the market closes on Tuesday, June 2.

Connected During the Pandemic & Beyond

Zoom enables people to connect via video, voice, chat, and content sharing. ZM’s offerings were already attractive in today’s globally and digitally connected world. And the coronavirus, which has forced millions of people to work from home and social distance, helped highlight its utility.  

Zoom is currently helping businesses, schools, and governments continue to function. Hopefully, schools won’t be remote for much longer and people will start to return to offices. But if things don’t race back to something close to normal, Zoom will benefit.

Looking beyond the coronavirus, businesses might decide to cut down on travel costs, especially if they have been able to function somewhat smoothly in the current environment. Plus, some companies might cut back on rent and commercial real estate expenses by trimming in-office staff or allowing for more flexible stay-at-home schedules when we come out of this mess—Twitter (TWTR - Free Report) and other tech firms have already announced long-term remote work plans.

 

 

 

 

 

 

 

 

Other Fundamentals

Zoom’s fourth quarter fiscal 2020 results wowed Wall Street in early March, with quarterly sales up 78% and fiscal-year sales up 88%. The company closed its fiscal year—ended on Jan. 31—with roughly 82,000 customers with more than 10 employees, up 61%. And the global pandemic has helped Zoom’s usage skyrocket from 10 million daily meeting participants, both free and paid, at the end of December to over 200 million in March.

Zoom’s popularity highlighted some security concerns, but the company is working to address the issues and Wall Street has shrugged them off. The San Jose, California-based firm, which went public in April 2019, has seen its stock price climb 140% in 2020 to crush the Tech sector’s 3% climb.

More recently, ZM stock is up over 50% since mid-March to match Facebook (FB - Free Report) and blow away both Netflix (NFLX - Free Report) and Amazon (AMZN - Free Report) . Zoom currently rests roughly 6% off its highs and is part of an industry that sits in the top 13% of our more than 250 Zacks industries.

Bottom Line

Zoom is a Zacks Rank #3 (Hold) right now that sports an “A” grade for Momentum in our Style Scores system. Looking ahead, our Zacks estimates call for Zoom’s Q1 sales to jump 66%, with its adjusted earnings projected to soar 233% to $0.10 a share. Investors should also note that ZM has crushed our bottom-line estimates in the trailing three quarters by an average of 340%.

ZM does face competition from giants such as Microsoft (MSFT - Free Report) . Nonetheless, Zoom is poised to grow within our digitally connected world, and the coronavirus has helped highlight its strengths and appeal. Therefore, longer-term investors might want to take a chance on Zoom, even though it could fall in the near-term given its massive run.

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