How fast is it changing?
At $105/share (last week) the market cap was $31 billion.
At $130/share (Friday) it was $38 billion.
At $150/share (earlier today), it is about $44 billion.
…I can’t keep up.
Revenue Assumption: INSANE GROWTH FOR TWO YEARS
Let’s say ZM revenue doubles this year and again next year, and they end up with about $2 billion in revenue at the end of 2021. That’s 100% YoY at great scale. No small feat! Perhaps unprecedented!
If the stock didn’t move (for almost 2 years), they would have a PS of 20 at the end of 2021. Seems pretty reasonable, but that means no gains from today’s price.
If the stock price continues to soar, say if it reaches $300/share by the end of 2021, the PS would still be 40. If that should happen, they would be expected to grow at near-100% on a revenue base of $2 billion. Frankly, I just don’t see it.
What if ZM’s share price goes up a respectable 25% the rest of this year, and the same in 2021? That would put it at about $235/share at the end of 2021. That would still put the PS at about 35. Not much different than the example above.
Conclusions (if any)
Heck, the valuation could go to $100 billion for all I know. But based on what, other than momentum?
I don’t know how to value this stock. I said earlier that I will hold whatever amount I feel comfortable holding and enjoy the ride. It’s only a mid-sized position, but as the stock goes higher and higher, I will trim it. I just see less and less room to profit long term.
I’d love to hear an alternate perspective on what they could be worth, and when.
I’m also stumped. It’s of course virus fever momentum related… $40+ billion market cap, the company guided to $915 million in revenue for FY 2021, which of course they will beat, but it seems the market is assuming revenue will grow at about 200% somehow this year. I can at least swallow the 20x sales multiple if they can accelerate growth to 200% ($2 billion) this year
Kudos to Saul for his monster size position! Amazing. Mine is very small, so I can either let it ride like Bear, or sell it and put it into companies that have been beaten to a pulp and are likely to come storming back as this crisis abates… Like PINS for example… is it likely PINS goes to $32 before Zoom can go to $300 from here?
How about we assume this year the revenue triple? I think this is possible. Last night I just participated in a Zoom meeting with an interest group. This evening another with another interest group. Not mention that just had a Zoom training last Friday in my company. This looks to me like Zoom goes from 0 to infinity.
If we assume this year revenue triple and next year double, the P/S will be 13 using your numbers. If the year after growth is projected to be 50%, 13 PS is very reasonable. The current market cap is $44B. If ZM do become a dominant company and add new things along the way, is $400B market cap possible?
My slob right brain says “better mousetrap”.
Better mousetraps create their own critical mass. Plenty of TAM to steal feom the other guys. Sorry I can’t add a lot of explaning and pondering about this.
I’d love to hear an alternate perspective on what they could be worth, and when.
Bear,
I remember that you felt it was overvalued at $70. It’s now at about $150 last I looked.
Look, If the coronavirus didn’t come along they would have grown at 80% this year. So $100 or revenue would have gone to $180. But right now they probably have four times as many users as they had in December, and growing every day. They may end the year with six times as many users as they started it with. Of course not all of them will be paying, but plenty will be. That has to bring their growth way above the expected 80%. Perhaps 160% revenue growth, or 200% growth, or 240% growth. And as it becomes the standard, there will be more growth in calendar 2021, with some of these free accounts converting and more and more people signing up.
So say they end up this year with 200% growth. $100 revenue has become $300. And next year, with 100% growth, it has become $600. I don’t think that sounds wildly exaggerating. I’m actually trying to be conservative.
No. of Recommendations: 10 How fast is it changing? At $105/share (last week) the market cap was $31 billion. At $130/share (Friday) it was $38 billion. At $150/share (earlier today), it is about $44 billion. …I can’t keep up.
I would just like to mention that at $150 ZM becomes the 4th largest SaaS by market cap just behind Shopify . Not sustainable.
So say they end up this year with 200% growth. $100 revenue has become $300. And next year, with 100% growth, it has become $600. I don’t think that sounds wildly exaggerating. I’m actually trying to be conservative.
I hear non-technical talk show hosts, other parents, and even patients bring up Zoom. FaceTime is still popular among individuals, and I only heard about Google Hangouts when a non-iphone using friend of my wife complained that he was being left out of a facetime group chat. Nobody has mentioned Teams or Webex (although my wife’s company uses Webex for presentations).
Most users are never going to pay but those hosting the session will be paying eventually. I trust management to know what amount of usage is reasonable to give away for free.
I built up a mid size position over the last week. I’ll reevaluate in a couple months when this should be winding down, since I’m sure many will take profits and move into other names as things recover.
So say they end up this year with 200% growth…And next year, with 100% growth…I don’t think that sounds wildly exaggerating. I’m actually trying to be conservative.
Remember, they grew 78% last Q and 88% last year. I thought giving them 100% growth for 2020 and 2021 was being aggressive!
For 200%+ growth this year, you’re hoping for:
2018: $330 million
2019: $623 million
2020: $2 billion?
2021: $4 billion?
Remember, this is not a company growing from 100 too 200 to 400 million (like Shopify a few years ago). This is growth at insane scale.
I think anyone hoping for this kind of growth is going to be very disappointed, but maybe I’m just being short-sighted.
(Still holding some but I have sold a call on my remaining shares with a $160 strike, so I may very well be out on 4/17!)
That’s actually faster than Shopify ever grew! Over 10x revenue in three years, over 4x revenue in two years. That’s phenomenal growth. They are used to it, and know how to manage it.
Just got a copy of this piece in my proton mail. While alarming for privacy advocates and the paranoid (count me in that group), I wonder if this data gathering feature makes ZM more valuable because of the possibilities having that data presents or if it scares some users away.
All stocks are getting hammered except for the few that might profit from the virus such as Zoom, Docusign, Teladoc etc. I expect that the opposite will occur once the virus threat is largely gone and people will be dumping the “virus-proof” stocks and buying the cheap ones with more upside potential (however this could of course be months away and Zoom might continue to increase)
I am not long Zoom, should have been in hindsight but there is no way that I am paying 37 times forward revenue at this price. Also not to forget that this is a videoconferencing tool, switching costs and lock-in is very low as opposed to for example platform SaaS. At our company we have Lifesize, Teams and Skype and most people honestly don’t care which one to use as it’s more or less the same experience anyways (Note: I have used Zoom in the past and while it’s a good tool, I don’t see the moat compared to similar tools). Therefore I believe Zoom is much more prone to disruption in the future than many other SaaS and possible new entrants might compete on price.
In Japan, drinking online with strangers when you are stuck at home is now a thing.
You just start a chat on teleconferencing app Zoom that anyone can join and you drink with the people that show up.
not just in Japan, I know several different people that did exactly this last weekend on Zoom in the U.S. I would bet this one of the main reasons it is up so much today, a lot more familiarity with Zoom all of a sudden based on last weekend’s online parties.
However, knowing those people the way I do, I doubt any of them paid for it (my group of friends at least). One of them specifically told me they got kicked off after an hour or so and that was the end of their chat
What’s wrong with momentum? Why knock a stock because it is riding momentum? Amazon…momentum. NetFlix…momentum. Google…momentum. FaceBook…momentum. At some point in the early adopter growth curve, many of today’s “companies” that have been converted into “verbs” ride the wave of momentum.
It can’t be understated in terms of momentum that it appears that Zoom is entering the “zeitgeist” of our society. Regardless of what you think of it as a company, investment or valuation, all of this exposure over the past few months and for the months to come is solidifying it into the zeitgeist.
In my circle of influence, I haven’t heard one person say that they were going to “Teams” somebody. In the past few weeks, I have been constantly on Zoom. Up until a few weeks ago, although it is one of my top 4 positions, I had never used Zoom. Over the past few days, my family has gathered on Zoom including my 80 yr old mother-in-law and 85 yr old great-aunt that have figured out Zoom for themselves; without technical assistance.
My son’s (public) school just started conducting class via Zoom today since we are locked down. There were plenty of challenges in getting everyone connected and the teacher didn’t realize she could “mute all”, which is a key feature in these kind of things. So it went badly. But tomorrow will be better.
I am very experienced with all the tele-meeting offerings, and I just can’t believe that they could do it over Webex. We are talking a bunch of teachers who are older and really don’t understand technology / can barely use it. And we are talking about kids from K onwards who, although are very tech savvy, really need strong ease of use. Even I have challenges over Webex (the app just doesn’t seem to work on my Mac, maybe my IT locked something down, and it doesn’t work at all over safari…it does work on Chrome).
I know some would disagree, but I don’t think any other tele-meeting offering can compete with zoom in ease of use, which is absolutely key right now. I also don’t think anyone could scale this much this fast, but I don’t have proof of that.
I am with Saul on valuation. Zoom is going to have a year of unprecedented growth. Bear, saying that Zoom can grow at 100% with the corona-bump, when they were going to grow at 80% without it, seems very much overly conservative to me. I don’t know how you forecast it, but I’m thinking this is a 2x year, with the potential to be more.
I do think this stock has to get back to 20x sales and one day, a few years later, at 10x sales, but not when you are growing at rates like this!
Well, as I stated I was going to do yesterday, as of a few minutes ago, I’m out of ZM around $162, happy for the additional 25% pop today, but to me, this just screams of momentum/FOMO for the last week. I’ll take the incredible gain in a very short time and be happy with it without getting too greedy. Was just a small position for me, but I’m currently rolling the proceeds into my CRWD and DDOG positions. Once the current crisis is over, they will be the better plays, I believe, and ZM will come back to earth.
Good luck to all! Hope it keeps going up for those continuing holding, but P/S is currently around 70, I believe? I guess I do pay attention to valuation at times. Agree nobody knows how much actual revenue all these new users are going to add, I think not as much as is being discussed, but that’s just a gut feeling.
(that said today and Friday, my Zoom calls started to have skype-for-business-like problems for the first time ever, I think call quality might be deteriorating a bit under the strain. But could be bandwidth issues too and there is no way I’m ever going back.)
