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Topline
Despite booming earnings that beat Wall Street’s expectations, shares of Zoom are tanking on Tuesday after a quarterly report revealed that the firm’s explosive pandemic growth could be reaching its upper limit, and the fortune of the firm’s billionaire founder and CEO, Eric Yuan, has plunged in tandem.
Eric Yuan, founder and chief executive officer of Zoom Video Communications, stands before the … [+]
© 2019 Bloomberg Finance LP
Key Facts
As of 1:00 p.m. EST, shares of Zoom have plummeted 14% on Tuesday, tanking Eric Yuan’s fortune by $2.8 billion as a result.
Yuan, who owns a roughly 22% stake in the work-from-home staple, is now worth $18.2 billion, Forbes estimates, down from $25.1 billion in late October.
After the market close on Monday, Zoom reported third-quarter sales of $777 million, a massive four-and-a-half times what the firm nabbed in the same period last year and much better than average analyst forecasts of less than $700 million, but lower than Wall Street’s rumored prediction of $800 million based on Zoom’s recently booming growth.
In addition to slowed growth, analysts on the company’s post-earnings conference call expressed concerns over higher costs and slimmed-down profit margins, but Zoom still beat average earnings expectations by about 30%, pulling in $297 million in net income.
“In the perverse world of mega-momentum stocks, this may qualify as a mildly underwhelming release,” Vital Media Knowledge Founder Adam Crisafulli wrote in a post-earnings note.
Even after the Tuesday plunge, Zoom stock has still skyrocketed up 500% this year–nearly 40 times the S&P 500’s return over the same period and even eclipsing the tech-heavy Nasdaq’s 36% gain in 2020.
Crucial Quote
“Much as it did for the last two quarters, no-moat Zoom continues to deliver significant upside compared with consensus expectations while delivering upside to guidance that somehow still seems conservative to us,” Morningstar analyst Dan Romanoff wrote in a note on Tuesday. He upgraded his Zoom price target from $153 to $176, but that’s still roughly 60% below current levels. In the face of “extreme macro uncertainty,” Romanoff said he and other Morningstar analysts “continue to struggle with Zoom’s valuation and view shares as overvalued.”
Key Background
Chinese-born Yuan founded Zoom in 2011 after more than a decade of experience in Silicon Valley working at video-conferencing firm WebEx and Cisco (after its WebEx acquisition in 2007). Now 50, Yuan took Santa Clara, Calif.-based Zoom public in April 2019 at an offering price of $36 per share. The stock nearly tripled over the next year before its explosive growth during the pandemic–fueled by millions of Americans newly immersed in remote work and virtual hangouts.
Surprising Fact
Zoom shares peaked at a price of about $568 on October 19, boosting Yuan’s fortune to an estimated $25.1 billion. The high-flying video-conferencing firm was at one point worth more than oil giant ExxonMobil, but shares have plunged nearly 30% from their high. Zoom’s market cap now stands at about $117 billion, compared to ExxonMobil’s $165 billion.
Big Number
$2.6 billion. That’s nearly how much revenue Zoom is expecting to nab in its fiscal 2021.
Further Reading
Zoom, Zoom, Zoom! The Exclusive Inside Story Of The New Billionaire Behind Tech’s Hottest IPO (Forbes)
All Eyes On Zoom: How The At-Home Era’s Breakout Tool Is Coping With Surging Demand–And Scrutiny (Forbes)