Zoom shares soar; Wall Street warns of risks when pandemic eases
(Reuters) - Wall Street analysts raised price targets for Zoom Video Communications (ZM.O) on Tuesday as its shares were set to hit record highs, while warning that a return to office work could hamper its success in luring small corporate customers.
Zoom shares soared 39% to $452 in trading before the bell, with brokerages raising price guidance by an average of $161 after the company beat estimates for second-quarter results and lifted its annual revenue forecast.
The numbers indicate that one of the success stories during the health crisis is turning its huge free-user base into hard cash.
“With ZM now clearly established as the global leader in the video collaboration market, its success paves a more clear path to compete in the enterprise market,” Rosenblatt analysts wrote.
J.P.Morgan analyst Sterling Auty, however, warned that the churn rate for Zoom’s high-risk small customers pointed to the risk of a pullback in revenue as the pandemic eases.
“The surge in growth has come increasingly from the riskiest customer segment,” he said. “Customers with less than 10 employees reached 36% of total revenue in the quarter.”
Video conferencing platforms have become a vital part of day-to-day life for people stuck at home under the coronavirus-related restrictions, be it for work, school or socializing.
Comments