but do you really think ZM’s market cap ($40B) should be valued 50% MORE than the COMBINED market cap ($27B) of your next 3 very large stock positions (CRWD, AYX, DDOG)? I obviously don’t think it should be worth 50% more than those 3 companies combined. Curious of your thinking here.
Hi doodles,
Look, I don’t have any magic window into the future, and anything I say could be totally wrong, as honestly it’s just speculation on my part. But here’s a way of looking at it.
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At the end of March Zoom will probably have added oh, ten times as many customers as they had at the end of December.
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Many of those will be non-paying, but many of the ones they had at the end of December were non-paying too. You have to take that into account (having a lot of non-paying customers is normal for them, not something just sprung on them).
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They had $188 million revenue in their December quarter.
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I’m not estimating that having eleven times as many customers will give them eleven times as much revenue although logically I could hope for six or eight times, but let’s say they just have three times as much revenue as in December.
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Am I being too conservative?
I’m trying to be -
Three times $188 million is $564 million. That’s a run rate of two and a quarter billion dollars of revenue, and with continued growth during the year, and based on the assumption we were using, their yearly revenue would probably be over $3 billion.
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If you divide the run rate into their market cap you get 17.8. If you divide $3 billion into their market cap you get 13.3.
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Please tell me where I am being too exuberant.
Those other three companies had combined revenue of $422 million last quarter. $564 is about 37% greater than $422, so not too far from your estimate.
By the way, my wife and I had my first Zoom meeting that was more than one-on-one on Wednesday, with some friends who are the CEO and her assistant of a smallish non-profit with about 56 employees, most working remotely across the country. They told us of having a Zoom meeting with the whole staff the week before and both described the feeling of comradeship and togetherness that they all seemed to feel, which they had never felt as much in their meeting before, and decided to continue having all their general meetings on Zoom, even after the pandemic is over. They are also setting up meetings with their regular donors on Zoom. Someone else told the board about a large law firm who had a partners’ meeting of their 60 plus partners on Zoom, because of the pandemic, but decided to continue having them on Zoom in after the pandemic because it was so much more practical than a room full of 64 partners. This is happening all over the world. That is obvious. But as far as the numbers, I’m just making wild guesses! I don’t have a clue where the top is.
Saul