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Zoom Video Communications Q3 earnings: Can they turn the tide after two-year selloff?


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Zoom Video Communications earnings bring the pandemic posterchild back into view as the stock falls back towards pre-pandemic levels

ZOOM_BG_361248790.jpgSource: Bloomberg
 

 Joshua Mahony | Senior Market Analyst, London | Publication date: Friday 18 November 2022 

When will Zoom Video Communications report their latest earnings?

Zoom will post its financial results for the third-quarter of the fiscal year 2023 after market close on Monday, November 21, 2022.

Zoom earnings –What should traders look out for?

Zoom shares have been on a rollercoaster ride over the past three-years, with the communications company turning into a household name overnight thanks to the Pandemic. The hastened transition towards online communication has helped lift the company out of relative obscurity, although the decline in Covid cases also brought the stock down with it. This takes the share price back down to levels not seen since the very inception of the pandemic; when Italy was welcoming the first version of the virus to European shores. However, things have changed significantly since those times, with the optimism around prospective future earnings having been exchanged for real incomes and fears that the return to the office further hurts income. Remarkably, while the share price is back at the same levels as February 2020, revenues are expected to come in almost six-times higher.

Does this provide a buying opportunity, or will we continue to see traders focus on the negatives?

The company has managed to introduce a suite of products over the years, helping to drive up potential income in a post-Covid world. Zoom Video Webinars, Zoom Rooms, Zoom Phones, Zoom One, and Zoom Node all provide different packages aimed at lifting income over time. However, with competitors such as Cisco, Microsoft, and Google all offering alternative products, there is a fear that the market becomes oversaturated and difficult to dominate. Coming at a time when tech stocks are finding themselves under pressure from rising interest rates, can Zoom finally start to turn the corner after a difficult two-years?

Zoom earnings – what to expect

Revenue – $1.1 billion vs $1.05 billion (Q3 2021), and $1.1 billion (Q2 2022).
Earnings per share (EPS) – $0.84 vs $1.11 (Q3 2021) and $1.05 (Q2 2022).

Zoom earnings – valuation and broker ratings

Analysts are largely hesitant for Zoom shares, with 2 ‘strong buys’, 7 ‘buys’, and a whopping 23 ‘hold’ recommendations. On the sell side, there is 1 ‘sell’ and 1 'strong sell' broker ratings.

Zoomrecs181122.PNGSource: Eikon

Zoom shares – technical analysis

Zoom shares have been attempting to regain ground over the course of the past six-weeks, with the wider rebound in equity markets helping to lift this stock somewhat too. However, the weekly chart highlights how the stock remains within a bearish trend that has been playing out for two-years now. Crucially, it is worthwhile noting the existence of the $61.05 support level down below given that it represents the pre-Covid lows. Before that, the recent low of $70.44 provides the first hurdle on the way down. Ultiately, while we could see further upside over the near-term, we would need to see a break up through the $124.78 swing-high to end this two-year sell-off.

ZM-Weekly-2022_11_18-08h37.pngSource: ProRealTime

On the daily chart, we have seen the stock push through $85.74 resistance, bringing about a fresh two-month high last week. This points towards a potential recovery phase for the stock, even if it is a retracement before the bears come back into play. To the upside, keep an eye out for those Fibonacci resistance levels up ahead as points of reference where the sellers could come back into play.

ZM-Daily-2022_11_18-08h38.pngSource: ProRealTime

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