Celebrations may be in order for Zoom Video Communications, Inc. (NASDAQ:ZM) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals.
Following the upgrade, the current consensus from Zoom Video Communications’ 26 analysts is for revenues of US$2.4b in 2021 which – if met – would reflect a substantial 78% increase on its sales over the past 12 months. Statutory earnings per share are presumed to jump 98% to US$1.64. Before this latest update, the analysts had been forecasting revenues of US$1.8b and earnings per share (EPS) of US$0.93 in 2021. So we can see there’s been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.
It will come as no surprise to learn that the analysts have increased their price target for Zoom Video Communications 71% to US$383 on the back of these upgrades. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Zoom Video Communications, with the most bullish analyst valuing it at US$525 and the most bearish at US$153 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It’s pretty clear that there is an expectation that Zoom Video Communications’ revenue growth will slow down substantially, with revenues next year expected to grow 78%, compared to a historical growth rate of 190% over the past year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 12% next year. So it’s pretty clear that, while Zoom Video Communications’ revenue growth is expected to slow, it’s still expected to grow faster than the industry itself.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, Zoom Video Communications could be worth investigating further.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. At Simply Wall St, we have a full range of analyst estimates for Zoom Video Communications going out to 2025, and you can see them free on our platform here..
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
When trading Zoom Video Communications or any other investment, use the platform considered by many to be the Professional’s Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email firstname.lastname@example.org.