Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Is Zoom (ZM) prospering in the Pandemic?

The potential end of the COVID-19 pandemic could harm Zoom (ZM). Mr. Market thinks the end of COVID-19 and lockdown could hurt the video-conferencing app.

For example, Zoom’s share price fell from $412.86 on 2 December 2020 to $183.92 on 3 December 2021. Conversely, Zoom Video Communications Inc. (NASDAQ: ZM) is making more money as the pandemic continues.

For instance, Zoom’s quarterly revenues grew from $773 million on 31 October 2020 to $1.05 billion a year later. Additionally, Zoom’s quarterly gross profit grew from $488 million on Halloween Day 2020 to $779.8 million on 31 October 2021. Plus, the quarterly operating income grew from $192.24 million on 31 October 2020 to $290.86 million a year later.

Notably, Zoom’s quarterly revenues grew by 35.23% in the quarter ending on 31 October 2021, Stockrow estimates. Conversely, the quarterly growth rate fell from 53.77% in the quarter ending on 31 July 2021 and 336.41% in the quarter ending on 31 October 2020.

Zoom shows Mr. Market’s assessment of the pandemic is insane

I think Zoom (NASDAQ: ZM) shows Mr. Market’s response to the pandemic is insane. To explain, Zoom’s stock price is crashing as its revenues grow and the company makes more money.

For example, the number of Zoom customers with over 10 employees grew from 50,800 in 2019 to 81,800 in 2020, to 467,100 in 2021, Statista estimates. Thus, Zoom is experiencing enormous growth in the pandemic. This important because Backlinkinfo estimates 64% of Zoom’ revenues come from customers with over 10 employees.

Consequently, Zoom is building an enormous digital platform. For example, Backlinkinfo estimates Zoom had 504,900 business customers in October 2021. In addition, users downloaded the Zoom mobile app 485 million times in 2020.

Zoom’s Phenomenal Growth

Backlinkinfo claims Zoom (ZM) hosted 45 billion minutes of webinairs and 3.3 trillion minutes of meetings in 2020. Those meetings could translate into income. Backlinkinfo estimates Zoom had 156 customers that contribute over $1 million in recurring revenue to its platform.

Zoom’s growth is phenomenal. Backlink estimates Zoom hosted 200 million minutes of meetings in the last quarter of 2013. That number grew to 101 billion minutes of meeting in January 2020, 2.6 trillion million minutes of meetings in April 2020, and 3.3 trillion minutes of meetings in October 2020.

Similarly, the number of Zoom annual webinair minutes grew by 7.4% between July and October 2020. Backlinkinfo estimates the number of annualized webinair minutes grew from 3 billion in January 2020 to 42 billion in April 2020 and 45 billion in October 2020.

Finally, Backlinkinfo. Estimates the number of Zoom daily meeting participants grew from 10 million on 31 December 2019 to 200 million on 31 March 2020 to 300 million on 21 April 2020.

How Much Money is Zoom (ZM) making?

Zoom’s growth is not translating into more cash. For example, Zoom (ZM) reported a quarterly operating cash flow of $394.56 million and a quarterly ending cash flow of -$652.58 million on 31 October 2021.

The cash flow shrank slightly over the past year. Zoom reported quarterly ending cash flow of -$2.7 million and a quarterly operating cash flow of $414.17 million on 31 October 2020.

Zoom borrows enormous amounts of money. The quarterly financing cash flow fell from $20.90 million on 31 October 2020 to -$44.22 million on 31 October 2021. Zoom reported a quarterly financing cash flow of $1.751 billion on 31 January 2021, which indicates enormous borrowing.

Stockrow reported no total debt for Zoom on 31 October 2021. The last total debt number was $100 million on 31 July 2021.

What Value Does Zoom (ZM) Have?

Zoom (ZM) has accumulated more value and cash during the pandemic. For instance, Zoom’s cash and short-term investments grew from $2.168 billion on 31 October 2020 to $5.418 billion on 31 October 2021.

Similarly, Zoom’s total assets grew from $3.05 billion on 31 October 2020 to $6.979 billion on 31 October 2021. Hence, Zoom’s total assets more than doubled in a year.

Therefore, Zoom is a great growth company but a poor stock because of the share price shrinkage. I think Zoom’s growth can continue.

Moreover, I think Zoom is in an excellent position to grow by acquisition. For example, I think Zoom should buy some entertainment properties and invest in the blockchain and social media. I believe one excellent strategy for Zoom will be to offer a blockchain video app.

Zoom’s Growth will Continue

With or without acquisition, I think Zoom’s growth will continue because the pandemic is not ending. In particular, news stories about COVID-19 variants and vaccine failures will drive many people and businesses to keep working from home and social distancing. Additionally, many organizations will want to maintain the savings from replacing air travel with video conferences.

I predict Zoom will keep profiting from the pandemic because its video conferencing solution works. Notably, Zoom (ZM) works even on my terrible internet connection.

If you are seeking a company that will keep growing for years to come, Zoom is worth investigating. However, I think Mr. Market grossly overpriced Zoom at $183.92 on 3 December 2021. In the final analysis, I consider Zoom a stock to watch because it is a growth stock that could soon fall to a reasonable price.