ZM Should be Over $200/share

I know Saul has pounded the table on ZM. I think he’s right. The challenge is figuring out how much revenue Zoom will get from their 190M + new users since Dec’19 and then deciding whether or not these security issues are concerning.

My take on the security issues. There’s nothing mischievous going on. Zoom did absolutely everything they could to innovate and scale to support the user growth.

User growth far surpassed everyone’s wildest dreams so they moved even faster and made some mistakes along the way. This is FAR different than intentionally misleading people. I’m giving Zoom the benefit of the doubt here and I applaud their transparency, accountability, and decision to focus only on security for 90 days.

Links about this oldest to newest.

  1. https://blog.zoom.us/wordpress/2020/04/01/facts-around-zoom-…

  2. https://blog.zoom.us/wordpress/2020/04/01/a-message-to-our-u…

  3. https://blog.zoom.us/wordpress/2020/04/03/response-to-resear…

My conclusion on security: This is providing investors with an incredible buying opportunity.

Now onto monetizing users. How much revenue will they bring in from previous + new customers? That’s what no one knows for sure. So I ran two scenarios. Please check my math here and let me know if I missed up.

Dec '19: 10M users, $188.3M rev, 130% expansion

Let’s be conservative and assume they go from 130% net expansion to previous customers only spending 75% of what they did before (I think they’ll actually increase net expansion to 140%+)

Revenue from previous users if cut to 75% = $141M rev.

Add 190m users and cut rev/10M users to $14M (from $188M)

Q1’21 rev: $407M

What if we keep the 75% current user spend so $141M but then make new users worth $28M per 10M users?

Q1’21 rev: $673M = 250%+ revenue growth.

You can continue with the estimations of monetizing at $42M per 10M new users and even up to $60M per 10M new users which is the highest I’d be comfortable assuming since we know they gave so many licenses away for free…

I previously though $ZM was outrageously valued at $150/share. Now I think it might be the most undervalued company around.

Again, I know I’m repeating a lot of what Saul and others have already said, but this helps me think through it… thoughts?

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Nothing about you specifically, but this is the latest in many efforts we have had at estimating users, revenue, valuation and the like and I have to say that I think it is all a bit humorous. Where, ever, have we had a company gain users like this. Moreover, we have no idea how many of those are corporate users and how many consumer users. Certainly, a lot of them are consumers, whose prospect as paying customers is probably not very high, but it sure sounds like there are a ton of corporate ones as well, which are quite likely to turn into paying customers. We also have no idea whether the bubble will burst 1) because of all this security bad press, or 2) because people will simply stop using it when all this is over. I don’t think either will be the case, but we really don’t know. Indeed, I think this period is going to result in some major shifts in WFH and in-person meetings, but, who knows, perhaps it will all relapse to the way it was before.

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You can continue with the estimations of monetizing at $42M per 10M new users and even up to $60M per 10M new users which is the highest I’d be comfortable assuming since we know they gave so many licenses away for free…

I previously though $ZM was outrageously valued at $150/share. Now I think it might be the most undervalued company around.

Again, I know I’m repeating a lot of what Saul and others have already said, but this helps me think through it… thoughts?.

XMFAL- I don’t see any problem with your estimates. However IMHO … and contrary to public opinion I believe all the efforts to compute estimated revenue for ZM are an empty exercise. There is no way to do this.Any result has a very high probability of being wrong. Maybe way wrong.

The number of total users including free users has gone up by a factor of 20 (I think,) Thats a lot of people. It includes a lot of influential decision makers in addition to that cadre who intend to continue using ZM for their own purposes based on recent experience. Moreover, large groups of new users will motivate other similar groups to follow suit.

So IMHO there is absolutely no relation between the current number of users and the number of paying users in the future except to say there will be many more of them. We will know when quarterly results are in.

In making certain analytical estimates when a variable is above a certain large number you

might as well assume it is infinite.

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tamhas,

You being up some good points.

Indeed, I think this period is going to result in some major shifts in WFH and in-person meetings, but, who knows, perhaps it will all relapse to the way it was before.

It is important to note that even if, say in 6 months, we go back to work and people start traveling for work, some percentage of trips won’t be taken. And companies will need a video conferencing platform. Most big companies probably already have a provider whether it is Webex, MS (Skype/Teams) or Zoom. But Zoom has gained brand name recognition and will be given a first or second look by many.
The big wildcard for Zoom is education, K-12 and universities. How many of these will sign up and pay? Maybe Zoom will create special education pricing. Maybe teachers and parents will have online chats. Maybe teachers will do online classes for kids that are home sick and they’ll e encouraged to stay home more when sick. Maybe many university classes will be broadcast so kids can stay in their dorms when sick.

Mike

Mike, I think the key issue here is whether or not they get past this ZoomBashing period. Clearly, we have no idea what the uptake is going to be in any market, but it is also clear that awareness has, well, zoomed! There have been significant trends in both education and corporate use toward various aspects of remote use. This whole thing could easily excelerate that dramatically. If Zoom can ride that wave, the results could be spectacular.

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What if …new users worth $28M per 10M users

Austin,

Where did $28 million come from?

Bear