Zoom Stock Bounced Back, Analysts Say More Gains are Ahead

Zoom stock price regained momentum after plunging sharply at the beginning of the year due to the broader market tech selloff. After hitting $350, the shares of the video calling company bounced back above $400. However, the shares are still presenting a buying opportunity for long-term investors as the shares are still trading well below from an all-time high of $475.

Zoom shares are also trading well below the analyst’s price target. BofA has provided a price target of $475, with a buy rating. BofA has provided the street high price target due to the stronger than expected second-quarter results along with the rosy outlook for the rest of the year.

ZM Zoom Video Communications, Inc. daily Stock Chart

“The results confirm our view that ZM is both a ‘vaccine’ and ‘vitamin’ as COVID-19 has permanently shifted the world to a hybrid-work environment and clearly elevated the awareness of cloud communications and video conferencing. This gives us confidence that these results are not just a pull-forward of business, but are durable and sustainable trends.”

Zoom has generated second-quarter revenue growth of 355% to $663.5 million, up substantially from analysts’ consensus estimate of $500M. In addition, the company also reported massive profitability amid robust revenue growth. Its operating income jumped to $188.1 million compared to last year’s income of $2.3 million.

Zoom also looks strong in terms of cash position. Its net cash from operations came in at $401.3 million, while the free cash flow stood around $373.4 million in the second quarter. The total liquidity was $1.5 billion.

The company expects third-quarter revenue to hit $685-$690 million. The market analysts are expecting third-quarter revenue in the range of $492.9 million. The company says full-year revenue is likely to hit $2.39 billion, representing a growth of 281% from the past year. The analysts say robust revenue growth is likely to back the share price momentum during the final quarter this year.

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