How do you value a stock like Zoom Video (ZM) , one where the total revenue growth is 169% and guidance is beaten by 64%. How do you put a price on a company that raised its annual guidance from $910 million to $1.78 billion which amounts to 188% year over year growth instead of just 46% growth? How about a company that was supposed to earn 11 cents and it drills a 44 cent number, driving consensus estimates from 45 cents to $1.21?
I think you say, "Whatever it was it is worth more now" and take it from there.
Zoom is one of those companies whose time has come. It's gone from about 20 million users to 300 million users in a few months. That's massive adoption. Its got companies and people galore paying up for its special products. It may be the easiest thing to set up since you learned to plug something into a wall socket or maybe, if you want the best security, into a power cord extension and then the socket.
Sure it screwed up on that security. Instead of ducking the question about why he didn't do more about security to begin with, Rockstar CEO Eric Yuan says, "as CEO I should have done a better job," considering there were many first-time users who didn't know their way around the site. Then to reinforce his own guilt, he said "that was a mistake I made. So we learned a hard lesson," which includes a loss of business.
Believe me, the whole analyst community is struggling with how to value the stock. Piper Sandler calls it "the Greatest Enterprise Software Quarter, but concerns on Forward Implications." DA Davidson says "upgrading to buy, one of the best quarters in software history." JMP says "v ideo is the new voice as Zoom Accelerates Billings to 346$. Yes, you read that right." JP Morgan simple says 1Q21: Wow. But JP Morgan struggles, too, starting the piece saying "this was the largest beat we have witnessed covering software for over 20 years. So where can it go from here."
I think the answer is higher, maybe much higher, because, even though the company is already worth more than $60 billion, up more than 224%, it has a product that is loved both by the enterprise and by the regular user. It was surreal to listen to hard core analysts talk about it as a preamble to their questions. Patrick Walravens, from JMP, begins his question with "So Eric, you started as an enterprise company, but now so many individuals are using Zoom to connect with their friends and their families and their classmates. When I go to say goodnight to my daughter at night, I get a lot of 'daddy, I 'm talking to my friends. Come back later.'"
Eric acknowledges the embrace of both the enterprise and the consumer, calls then the prosumers and makes it clear that video is the new voice, especially for students, students, by the way, who may not come back to campus next fall.
Before asking his question, Ryan MacWilliams of Stephens, acknowledges that he, and I quote "just attended a Zoom wedding last months and it went great and my own wedding in September might be over Zoom. So I just want to say thank you for a back-up plan."
Or how about the hard-bitten Heather Bellini from Goldman Sachs saying, "Look I just wanted to say first of all, thank you for the company and with your steering acting the way it did over the last few months, which has been just such a trying time for so many, but not only obviously did you enable all of us to stay in touch and working but just being able to still connect with family and friends so thank you I think, on behalf of everybody."
Yuan's remarkably modest. He gives credit by a whole host of companies from Amazon (AMZN) Web Services and Oracle (ORCL) to Atlassian (TEAM) , Equinix (EQIX) , HubSpot (HUBS) , Okta (OKTA) , PagerDuty (PD) and SurveyMonkey (SVMK) . Does anyone not like this guy? He didn't even have a bad word to say about RingCentral (RNG) which is trying to move into this business, not Slack (WORK) or Microsoft (MSFT) . Plenty of TAM, or Total Addressable Market, to go around.
Finally, I know I was concerned that Eric used servers in China. What does he do? He adds Lieutenant General HR McMaster, former National Security Adviser, to the board. And with that Eric rests his case.
That's why I say, when asked where Zoom can go, my answer is "higher" and then pressed, my answer is "higher still."
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