Zoom: Desperate Move To Buy Growth
- Zoom agreed to buy Five9 for $14.7 billion, or ~20x forward revenues.
- The cloud video communications stock is facing a tough year as enterprises return to the office and forecasted growth slows to below 20x.
- The stock shouldn't trade at more than 10x forward revenues.
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The biggest worry with tech stocks that benefitted from the COVID-19 lockdowns was a normalization of business activity leading to a reduction in growth rates going forward. Zoom Video (NASDAQ:ZM) is a prime technology provider that blossomed in 2020 and faces tough growth comps going forward. The company made what appears a desperate move to acquire growth via the expensive deal to buy Five9 (NASDAQ:FIVN). My investment thesis remains bearish on the stock.
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August - 30
After reporting FQ2 revenues of $1.021 billion, $ZM just forecast a sequential revenue dip in FQ3. -Third Quarter Fiscal Year 2022: Total revenue is expected to be between $1.015 billion and $1.020 billion and non-GAAP income from operations is expected to be between $340.0 million and $345.0 million. Non-GAAP diluted EPS is expected to be between $1.07 and $1.08 with approximately 309 million non-GAAP weighted average shares outstanding.
The stock is down 7% in AHs trading to $322 as the market isn't very happy with the reality of slowing growth. One has to guess the yearly lows are at risk now.