Zoom Video Communications, Inc. (ZM) is the Stock of the Day at Real Money as it soars in pre-market trading before Friday's opening bell after releasing its first earnings report since its initial public offering (IPO). Zoom's non-GAAP earnings for its fiscal first quarter came in at three cents a share, which is up from a loss of two cents a share in the year-ago first quarter and beat the consensus forecast by two cents. Zoom's revenue of $122 million also more than doubled the year-earlier figure and was well ahead of analyst estimates of $111.6 million.
With prices hovering in the $90-91 area about an hour before Friday's opening bell, let's check out two charts for the provider of web conferencing services.
In this daily Japanese candlestick chart of ZM, below, we shortened our moving averages to 20 days and 50 days. We don't have 50 days of trading yet but prices should gap above the rising 20-day average line. Prices will retest the May highs. The lows in early May and late May show lower shadows, telling us with hindsight that traders rejected the lows and pushed prices higher. The daily On-Balance-Volume (OBV) line rose from the IPO launch until the May zenith. The line looks like it was turning up this month, suggesting that buyers were acting more aggressively ahead of the earnings report. Candlestick charts do not give price targets, so let's look at a Point and Figure chart.
In this Point and Figure chart of ZM, below, we do not have a lot of price history to review but the software is projecting an upside price target in the $101 area.
Another way of getting a price target is a double from a consolidation area -- let's say the $75 area. This would suggest a target around $150 or so.
Bottom line strategy: it looks like ZM will be one of the hot IPOs of 2019. Our price targets will be $100 and then $150, but the real question is how to go long and what to risk. Maybe buy a starter (small) position here on Friday after the first hour of trading and consider buying more after two down days, assuming there is some profit-taking. I would suggest a stop $10 from entry.