Key Takeaways
- Zoom’s fiscal Q1 earnings release scheduled for after markets close Thursday, May 21
- Wall Street consensus calls for $1.42 earnings per share and $1.22 billion in revenue, reflecting 4.3% annual growth
- Shares of ZM climbed 2.1% to $99.42 in Wednesday trading before the earnings announcement
- Recent analyst actions include Baird’s upgrade to $105 and Citigroup’s increase to $122
- Average analyst price target of $98.52 suggests minimal upside potential from current price
Zoom Communications (ZM) is set to unveil its fiscal first-quarter financial performance following Thursday’s market close, drawing significant attention from investors and analysts. Shares finished Wednesday’s session at $99.42, registering a 2.1% gain.
The Street is looking for earnings of $1.42 per share alongside revenue of $1.22 billion. These projections represent a 4.3% increase in revenue compared to the year-ago quarter, though earnings per share would decline modestly from the $1.43 delivered in last year’s corresponding period.
Equally noteworthy is that both metrics would represent quarter-over-quarter declines compared to the previous quarter’s results of $1.44 in EPS and $1.25 billion in revenue.
Zoom’s explosive pandemic-driven expansion phase has ended. The critical issue now revolves around whether its emerging product portfolio can compensate for slowing core business growth.
Recent Analyst Revisions
Several Wall Street firms adjusted their positions before the earnings release. William Power at Baird increased his price objective from $95 to $105 on May 19, expressing confidence in Zoom’s enterprise platform strategy. Power maintains an 83% accuracy record, positioning him among the most credible analysts covering the stock.
Tyler Radke at Citigroup demonstrated even stronger conviction, boosting his target from $106 to $122 on May 15 while reaffirming his Buy recommendation. Needham analyst Joshua Reilly maintained his Buy rating with a $100 price objective.
Skepticism exists as well. Patrick Walravens at Citizens continued his Market Perform stance, while Bernstein’s Peter Weed actually reduced his target from $90 to $88 in February.
Among 29 analysts covering the stock, 16 recommend buying, yet the consensus price target of $98.52 leaves essentially no room for appreciation from current trading levels. This presents somewhat contradictory signals to investors.
EPS projections have remained relatively stable throughout the past two months, with analysts adopting a wait-and-see approach before the quarterly results.
Critical Factors to Monitor
The flagship video conferencing platform has reached maturity. Revenue expansion has decelerated to low-to-mid single-digit percentages, creating pressure on Zoom’s diversification efforts to deliver meaningful contributions.
Zoom Phone has surpassed 10 million seats while the Contact Center solution continues its early development stage. Market participants are eager to see sustained enterprise client acquisition — the prior quarter saw 105 new customers with annual spending exceeding $100,000.
AI Companion capabilities are receiving heightened attention. While Zoom has aggressively integrated artificial intelligence features, uncertainty remains whether these innovations are generating actual upgrades or merely maintaining competitive parity with rivals like Microsoft Teams.
Forward guidance will probably dominate Thursday’s earnings call discussion. During February’s announcement, Zoom exceeded revenue expectations with $1.25 billion but disappointed on earnings at $1.44 versus the $1.49 consensus forecast. Full-year EPS projections also came in below Street estimates.
With a forward price-to-earnings ratio of 16.09 and gross profit margins approaching 77%, the company’s profitability metrics remain robust. Current market capitalization stands at $29.3 billion.
The April 15 appointment of Russell Dicker as chief product officer adds another dimension to Thursday’s earnings event, marking his inaugural quarterly call in this leadership role.
