With people across the globe struggling to stay indoors as the coronavirus outbreak spreads, they’re turning to video conferencing with their loved ones, and with several free services at their disposal, Zoom is increasingly gaining its momentum. The shares of Zoom Video Communications are trading at about $124 — the stock has increased over 200% in less than a year, compared to a 17% decline for the S&P 500.
With such a gain, Zoom has outperformed several IPOs of the tech space, including companies like Slack, Uber, and Lyft, that went public in 2019. The company made its debut last April at $36 per share, and the stock closed its first day of trading up 72%. However, similar to other growth stocks, the company’s investors have also gone through a lot of volatility in the past year. Case in point, recently Zoon closed at a record high of $125 in the first week of March with good quarterly results, before it fell victim to the coronavirus-fueled sell-off.
Zoom, providing video-first communications platform as well as web-conferencing services to companies, and also works as a one-stop-shop for virtual business meetings and webinars, continues to gain significant traction in the enterprise collaboration segment. It ended fiscal 2020 with sales of $622.7 million, with a good for the growth of 88%YoY. It exited the fourth quarter with an annualised revenue run rate of approximately $750 million. The number of customers with revenue of $100,000 or more grew 86% to 641 at the end of fiscal 2020.
The company reported a non-GAAP operating margin of 14.2%, up 900 basis points YoY, while free cash flow was up 397% to $114 million. Those results helped Zoom report its fourth consecutive year of positive free cash flow and adjusted operating income.
With several products over the year — Zoom Phone and Zoom Chat, the company aims to deliver a streamlined user experience and modernise employee interactions, making collaboration between teams easier.
With the Covid-19 outbreak in hand, we have seen how the indexes are pushed and how heavily it is weighing on consumer demand and spending as governments around the world will have to lock down significant cities to contain the spread of this virus. Such a situation has spooked the investors, with declining if the country’s fixed assessment in the first two months of 2020, slumping of industrial production with 13.5% and plunging of retail trade with 20.5% YoY. Countries, including Italy, Spain, and now France, are likely to report declining economic metrics in the next quarter as well. Alongside, we have also witnessed that the airline stocks have taken a massive hit, with the shares of restaurants, clubs, pubs, cafes and travel companies declining drastically.
Having said that, this video conferencing company — Zoom’s shares are trading just a dollar short of their all-time closing high, even in this tumultuous market. This has a big reason behind it — as employees are asked to work from home and avoid public transit, which in turn increases the demand for collaboration tools, which fortunately worked out for Zoom.
Although the company’s stock has already more than tripled from its original IPO price, Zoom still has the potential to create massive wealth for its long-term investors, as the enterprise collaboration segment is expected to top $48 billion in 2024, up from $31 billion in 2019. Experts believe the company Zoom will grow its top line by well over 30% annually for years as companies are increasingly encouraging employee efficiency by going remote. Such a digital transformation will play out perfect for players in the space, including Zoom.