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Zoom Video was one of the first star coronavirus lockdown stocks, and its recently-reported quarterly financial results and updated guidance helped propel ZM shares to new highs. Now let’s dive into why the video chat platform’s stock is Tuesday’s Bull of Day.
Video Chat Explosion
Before we recap some of its recent blowout results and look ahead, it’s worth reviewing Zoom’s business and basic pitch to investors.
Zoom offers people the ability to connect via video, voice, chat, and content sharing. The firm, which went public in April 2019, boasts that its cloud-native platform can connect “thousands of people in a single meeting across disparate devices and locations.” This made it the near perfect stock to outperform the market during the coronavirus lockdowns.
ZM’s platform has proliferated during the coronavirus, with businesses, schools, governments, and people all utilizing the video-based communication platform. However, the lockdowns won’t last forever, and people around the world are slowly returning to work and something close to their normal routines.
That said, there is no guarantee that companies, especially in big cities with public transportation, will race back to the office. Plus, firms that find the remote environment relativity seamless might cut back on rent and commercial real estate expenses by trimming in-office staff or allowing for more flexible stay-at-home schedules—look at what Twitter , Facebook and others have already announced.
Better still, Zoom’s offerings were attractive before the pandemic in today’s digitally and globally connected society. Zoom allows enterprises the chance to connect face-to-face with different locations and remote staff, while also cutting down on travel costs.
Pandemic Quarter Results
Zoom on June 2 reported its Q1 fiscal 2021 results for the three-month period ended April 30. The company’s adjusted earnings soared from $0.03 to $0.20 per share to blow away our Zacks estimate by 100%. And ZM’s revenue skyrocketed 169% to hit $328.2 million, which also destroyed our estimate.
Meanwhile, it closed the quarter with around 265,400 customers with more than 10 employees. This marked a 354% jump from the year-ago period and an over 220% climb from the fourth quarter’s 82,000. Meanwhile, Zoom’s customers contributing more than $100,000 in trailing 12-month revenue climbed 90% to 769.
Outlook
Zoom also raised its guidance following its pandemic-boosted quarter, with it now projecting revenue of between $495 to $500 million in the July quarter. Zoom also nearly doubled its previous fiscal 2021 revenue forecast, with its new range between $1.78 and $1.80 billion, up from $905 to $915 million.
Zoom’s second quarter revenue is projected to climb over 241%, with Q3 expected to jump 150% higher, based on our current Zacks estimates.
Investors can also see how much Zoom’s bottom-line outlook has surged in the last week. The company’s Q2’s consensus estimate is up 282%, with FY21 up 156% and FY22 up 129%. Our Zacks estimates now call for Zoom’s adjusted second quarter earnings to soar 425% from the prior-year quarter to $0.42, with its fiscal 2021 estimate expected to expand 214%.
Bottom Line
Zoom’s coronavirus-boosted expansion created some privacy worries. But the stock has continued to soar despite the concerns and the company is working to address and fix any security issues. ZM shares hit a new high following its Q1 release of around $224 a share, with the stock up 30% since May 27.
This recent run is part of its massive 2020 climb that has seen Zoom skyrocket roughly 210% and put fellow stay-at-home standouts like Netflix and Amazon to shame. Despite the surge, Zoom’s valuation picture has improved recently based on its stellar new outlook.
Zoom is currently a Zacks Rank #1 (Strong Buy) that earns an “A” grade for Momentum and a “B” for Growth in our Style Scores system. Zoom does face competition from giants such as Microsoft and its 2020 run will be hard to keep up, especially since some investors might start to take home profits soon.
That said, Zoom seems poised to grow as part of our digitally connected world for years to come. And the coronavirus might help accelerate or spark a broader work-from-home push. Investors should also note that Zoom’s free cash flow climbed from $15.3 million in Q1 FY20 to $251.7 million.
Hewlett Packard Enterprise stock has outperformed the broader tech space since the market’s March 23 lows, up 48% vs. 40%. However, the company fell short of our second quarter earnings and revenue estimates on May 21 and its near-term outlook appears rough.
The Short Story
Hewlett-Packard split into HPE and HP Inc. back in 2015. HPE sells enterprise-level servers, storage, networking gear, and more. But the firm has lost ground to companies like Cisco and fallen behind in cloud computing. Investors should also note that Hewlett Packard Enterprise is attempting to shift to “as-a-service” offerings, which the likes of Salesforce and others helped popularize.
HPE’s revenue has continued to decline in recent years and its Q2 sales slipped 16%. Meanwhile, its adjusted quarterly earnings fell nearly 50% from the year-ago period to $0.22 a share. This missed our Zacks consensus by 30%.
The company also did not provide any updated fiscal 2020 guidance after it withdrew its outlook in early April. “The global economic lockdowns since February significantly impacted our fiscal Q2 financial performance,” CEO Antonio Neri said in prepared remarks.
Outlook
As we mentioned at the top, HPE stock has climb recently. But investors can see in the nearby chart that its shares have lagged the tech sector over the last three years.
The stock is still down 27% in 2020 and it’s trading at under $12 a share. This means that the stock is ‘cheap’ and it has plenty of room to climb before it hits its 52-week highs of around $17 a share.
That said, our Zacks estimates call for HPE’s second quarter sales to sink another 15%, with its full-year 2020 revenue projected to dip nearly 13%. Meanwhile, its adjusted quarterly earnings are expected to tumble 47% to help push its FY20 EPS figure down by over 29%.
Bottom Line
HPE’s earnings revisions have trended heavily in the wrong direction recently, especially for fiscal 2020 and FY21. This negativity helps HPE hold a Zacks Rank #5 (Strong Sell) right now, alongside its “F” grade for Momentum in our Style Scores system.
Some investors might want to take a chance on HPE as a ‘cheap’ tech stock that sits well off its highs, despite a recent climb. However, longer-term investors likely want to look elsewhere until HPE proves its business transitions are starting to pay off.
Additional content:
Apple's iPhone Delay Mars Broadcom's View
Apple has not provided any official statement regarding iPhone delay but the guidance provided by Broadcom substantiates it to a certain extent.
Broadcom, a notable supplier of RF power amplifiers to Apple, recently delivered better-than-expected second-quarter fiscal 2020 results. However, the company provided a bleak fiscal third-quarter revenue guidance.
The chipmaker estimates semiconductor revenues in wireless domain to decline in fiscal third quarter as its “large North American mobile phone customer”, in all probability indicating Apple, delays launch of its next-generation smartphone. Markedly, Apple usually updates its iPhone portfolio in September, annually.
Otherwise, in fiscal third quarter, Broadcom would “normally expect to see a double-digit sequential uplift in revenue.” Hence, management now expects to witness uptick in wireless revenues in the fiscal fourth quarter.
Moreover, management has stated that there are no changes in terms of design and content.
For third-quarter fiscal 2020, Broadcom anticipates revenues of $5.75 billion (+/- $150 million). The Zacks Consensus Estimate is currently pegged at $5.84 billion. (Read more: Broadcom Q2 Earnings & Revenues Surpass Estimates)
Markedly, on Jan 23, 2020, Broadcom, which currently carries a Zacks Rank #2 (Buy), inked two separate multi-year agreements with iPhone maker, Apple. Per the 8K filed with the SEC, the deal is anticipated to generate $15 billion for the chipmaker. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Further, it may be noted that Apple contributed nearly 20% to its net revenues in fiscal 2019.
Lingering Coronavirus Woes Disturb Apple
The possible delay of the launch of its first 5G-supported iPhone device — iPhone 12 — can be attributed to coronavirus crisis-induced supply-chain constraints and anticipations of sluggish demand in the wake of the adverse economic scenario.
Nevertheless, this Zacks Rank #2 (Buy) company has been undertaking hiring efforts from Intel and Qualcomm to work on 5G modems and reduce dependence on suppliers. Further, beginning 2021, all iPhone models are expected to support 5G.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Zoom Video, Hewlett Packard Enterprise, Apple and Broadcom highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – June 9, 2020 – Zacks Equity Research Shares of Zoom Video (ZM - Free Report) as the Bull of the Day, Hewlett Packard Enterprise (HPE - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Apple (AAPL - Free Report) and Broadcom (AVGO - Free Report) .
Here is a synopsis of all four stocks:
Bull of the Day:
Zoom Video was one of the first star coronavirus lockdown stocks, and its recently-reported quarterly financial results and updated guidance helped propel ZM shares to new highs. Now let’s dive into why the video chat platform’s stock is Tuesday’s Bull of Day.
Video Chat Explosion
Before we recap some of its recent blowout results and look ahead, it’s worth reviewing Zoom’s business and basic pitch to investors.
Zoom offers people the ability to connect via video, voice, chat, and content sharing. The firm, which went public in April 2019, boasts that its cloud-native platform can connect “thousands of people in a single meeting across disparate devices and locations.” This made it the near perfect stock to outperform the market during the coronavirus lockdowns.
ZM’s platform has proliferated during the coronavirus, with businesses, schools, governments, and people all utilizing the video-based communication platform. However, the lockdowns won’t last forever, and people around the world are slowly returning to work and something close to their normal routines.
That said, there is no guarantee that companies, especially in big cities with public transportation, will race back to the office. Plus, firms that find the remote environment relativity seamless might cut back on rent and commercial real estate expenses by trimming in-office staff or allowing for more flexible stay-at-home schedules—look at what Twitter , Facebook and others have already announced.
Better still, Zoom’s offerings were attractive before the pandemic in today’s digitally and globally connected society. Zoom allows enterprises the chance to connect face-to-face with different locations and remote staff, while also cutting down on travel costs.
Pandemic Quarter Results
Zoom on June 2 reported its Q1 fiscal 2021 results for the three-month period ended April 30. The company’s adjusted earnings soared from $0.03 to $0.20 per share to blow away our Zacks estimate by 100%. And ZM’s revenue skyrocketed 169% to hit $328.2 million, which also destroyed our estimate.
Meanwhile, it closed the quarter with around 265,400 customers with more than 10 employees. This marked a 354% jump from the year-ago period and an over 220% climb from the fourth quarter’s 82,000. Meanwhile, Zoom’s customers contributing more than $100,000 in trailing 12-month revenue climbed 90% to 769.
Outlook
Zoom also raised its guidance following its pandemic-boosted quarter, with it now projecting revenue of between $495 to $500 million in the July quarter. Zoom also nearly doubled its previous fiscal 2021 revenue forecast, with its new range between $1.78 and $1.80 billion, up from $905 to $915 million.
Zoom’s second quarter revenue is projected to climb over 241%, with Q3 expected to jump 150% higher, based on our current Zacks estimates.
Investors can also see how much Zoom’s bottom-line outlook has surged in the last week. The company’s Q2’s consensus estimate is up 282%, with FY21 up 156% and FY22 up 129%. Our Zacks estimates now call for Zoom’s adjusted second quarter earnings to soar 425% from the prior-year quarter to $0.42, with its fiscal 2021 estimate expected to expand 214%.
Bottom Line
Zoom’s coronavirus-boosted expansion created some privacy worries. But the stock has continued to soar despite the concerns and the company is working to address and fix any security issues. ZM shares hit a new high following its Q1 release of around $224 a share, with the stock up 30% since May 27.
This recent run is part of its massive 2020 climb that has seen Zoom skyrocket roughly 210% and put fellow stay-at-home standouts like Netflix and Amazon to shame. Despite the surge, Zoom’s valuation picture has improved recently based on its stellar new outlook.
Zoom is currently a Zacks Rank #1 (Strong Buy) that earns an “A” grade for Momentum and a “B” for Growth in our Style Scores system. Zoom does face competition from giants such as Microsoft and its 2020 run will be hard to keep up, especially since some investors might start to take home profits soon.
That said, Zoom seems poised to grow as part of our digitally connected world for years to come. And the coronavirus might help accelerate or spark a broader work-from-home push. Investors should also note that Zoom’s free cash flow climbed from $15.3 million in Q1 FY20 to $251.7 million.
Bear of the Day:
Hewlett Packard Enterprise stock has outperformed the broader tech space since the market’s March 23 lows, up 48% vs. 40%. However, the company fell short of our second quarter earnings and revenue estimates on May 21 and its near-term outlook appears rough.
The Short Story
Hewlett-Packard split into HPE and HP Inc. back in 2015. HPE sells enterprise-level servers, storage, networking gear, and more. But the firm has lost ground to companies like Cisco and fallen behind in cloud computing. Investors should also note that Hewlett Packard Enterprise is attempting to shift to “as-a-service” offerings, which the likes of Salesforce and others helped popularize.
HPE’s revenue has continued to decline in recent years and its Q2 sales slipped 16%. Meanwhile, its adjusted quarterly earnings fell nearly 50% from the year-ago period to $0.22 a share. This missed our Zacks consensus by 30%.
The company also did not provide any updated fiscal 2020 guidance after it withdrew its outlook in early April. “The global economic lockdowns since February significantly impacted our fiscal Q2 financial performance,” CEO Antonio Neri said in prepared remarks.
Outlook
As we mentioned at the top, HPE stock has climb recently. But investors can see in the nearby chart that its shares have lagged the tech sector over the last three years.
The stock is still down 27% in 2020 and it’s trading at under $12 a share. This means that the stock is ‘cheap’ and it has plenty of room to climb before it hits its 52-week highs of around $17 a share.
That said, our Zacks estimates call for HPE’s second quarter sales to sink another 15%, with its full-year 2020 revenue projected to dip nearly 13%. Meanwhile, its adjusted quarterly earnings are expected to tumble 47% to help push its FY20 EPS figure down by over 29%.
Bottom Line
HPE’s earnings revisions have trended heavily in the wrong direction recently, especially for fiscal 2020 and FY21. This negativity helps HPE hold a Zacks Rank #5 (Strong Sell) right now, alongside its “F” grade for Momentum in our Style Scores system.
Some investors might want to take a chance on HPE as a ‘cheap’ tech stock that sits well off its highs, despite a recent climb. However, longer-term investors likely want to look elsewhere until HPE proves its business transitions are starting to pay off.
Additional content:
Apple's iPhone Delay Mars Broadcom's View
Apple has not provided any official statement regarding iPhone delay but the guidance provided by Broadcom substantiates it to a certain extent.
In fact, rumors regarding the same have been doing the rounds for quite some time now. (Read more: Will Apple Delay 5G iPhone Launch Due to Coronavirus Mess?)
Broadcom, a notable supplier of RF power amplifiers to Apple, recently delivered better-than-expected second-quarter fiscal 2020 results. However, the company provided a bleak fiscal third-quarter revenue guidance.
The chipmaker estimates semiconductor revenues in wireless domain to decline in fiscal third quarter as its “large North American mobile phone customer”, in all probability indicating Apple, delays launch of its next-generation smartphone. Markedly, Apple usually updates its iPhone portfolio in September, annually.
Otherwise, in fiscal third quarter, Broadcom would “normally expect to see a double-digit sequential uplift in revenue.” Hence, management now expects to witness uptick in wireless revenues in the fiscal fourth quarter.
Moreover, management has stated that there are no changes in terms of design and content.
For third-quarter fiscal 2020, Broadcom anticipates revenues of $5.75 billion (+/- $150 million). The Zacks Consensus Estimate is currently pegged at $5.84 billion. (Read more: Broadcom Q2 Earnings & Revenues Surpass Estimates)
Markedly, on Jan 23, 2020, Broadcom, which currently carries a Zacks Rank #2 (Buy), inked two separate multi-year agreements with iPhone maker, Apple. Per the 8K filed with the SEC, the deal is anticipated to generate $15 billion for the chipmaker. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Further, it may be noted that Apple contributed nearly 20% to its net revenues in fiscal 2019.
Lingering Coronavirus Woes Disturb Apple
The possible delay of the launch of its first 5G-supported iPhone device — iPhone 12 — can be attributed to coronavirus crisis-induced supply-chain constraints and anticipations of sluggish demand in the wake of the adverse economic scenario.
Moreover, in its March quarter, Apple witnessed a decrease of 6.7% in iPhone sales. Both demand and supply were negatively impacted by the outbreak of coronavirus. Notably, Apple’s share in the global smartphone market fell from 18% in fourth-quarter 2019 to 14% in first-quarter 2020, per Counterpoint Research. (Read more: IDC Predicts Low Smartphone Shipments on Coronavirus Impacts)
Nevertheless, this Zacks Rank #2 (Buy) company has been undertaking hiring efforts from Intel and Qualcomm to work on 5G modems and reduce dependence on suppliers. Further, beginning 2021, all iPhone models are expected to support 5G.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>
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Zacks Investment Research
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.