ZM valuation

Its very conceivable that this quarter Zoom will see its user base increase by 10x and revenue increase by 3x… just this quarter!

But what happens next quarter… with entire world already on ZOOM this quarter, at-best it can grow another 20%…

There is a big difference between users and revenue, “entire world already on ZOOM” are not all paying customers. The ones that decided that it was worth paying are much less likely to give it up. In post after post you hear comments like Fool alacartespirit’s

I suspect Zoom will now be used for mid-week meetings, to hold services that would normally be cancelled due to inclement weather, and probably other things, too, now that this crisis has brought so many more people up to speed. As I discovered today in a Zoom acting class, while it’s not the same as real life, the platform does offer some unique advantages that people will still want when the crisis recedes.

True, covid-19 will no longer act as a catalyst, but the size of the market will have expanded greatly.

Denny Schlesinger

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Not sure if Zoom get paid by per user or by usage.

Zoom’s pricing courtesy Fool alacartespirit:

https://zoom.us/pricing

Denny Schlesinger

Apologies if this was mentioned earlier (too many posts to keep up with).

Adding to the Zoom user community: Howard Stern is doing his radio show this week using Zoom, a point he made several times on Monday’s show which is being heard by millions of people. He had Jimmy Kimmel on as a guest Monday via Zoom as well. Some free advertising!

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Its very conceivable that this quarter Zoom will see its user base increase by 10x and revenue increase by 3x… just this quarter!

But what happens next quarter… with entire world already on ZOOM this quarter, at-best it can grow another 20%…

Very important point, Nilvest. Even if we get this huge one-time bump, the growth after that will be SLOWER than growth is now. Whether it’s in one year or two, ZM will emerge a $2 or 3 or 4 billion revenue per year company, and at that scale the ABSOLUTE BEST COMPANIES grow revenue around 25% to 30%. It’s just the law of large numbers.

So all you need Zoom to do is:

  1. Go from 623m TTM revenue to 4 billion in just two years
  2. Still be growing at 25% to 30% at that point

and if it can manage that, in two years,

IF the PS is 10, mkt cap is 40 billion, less than the ~47 billion at yesterday’s close.
If the PS is 15, mkt cap is 60 billion, up 30% or so.
If the PS is 20, mkt cap is 80 billion, up 70% or so.

…Assuming no dilution.

Conclusion: As I said previously, ZM (on momentum) may hit 100 billion before the week is up. But its real value is nowhere near that, and won’t be for years, if ever.

Bear

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Something people may not know is that Zoom has seamless integration with Epic.

It also translates. I was wondering about archiving these within the emr at some point, and the cost of a translator line vs zoom.

Zoom has more optionality than any of us realize. Communication is a key component of many industries- once you come to see this, it’s hard not to see them passing the market cap of Verizon & AT&T.

(Also, epic is ~28% of US hospitals: https://www.beckershospitalreview.com/ehrs/klas-epic-cerner-… )

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Zoom has more optionality than any of us realize. Communication is a key component of many industries- once you come to see this, it’s hard not to see them passing the market cap of Verizon & AT&T.

The valuations of VZ and T are about 4 or 5 times ZM’s valuation, but over 100 times ZM’s revenue.

Mkt Cap
ZM - $47 billion
VZ - $208 billion
T - $192 billion

TTM Revenue
ZM - $623 million
VZ - $130 billion
T - $180 billion

I’m not disagreeing that ZM will pass their market cap, but how long do you think it will take?

Bear

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From an email from one of my old classmates who lives in Massachusetts (bolding is mine)
Saul

“The governor… has been aggressive about shutting things down,and, of course, all the colleges, universities, and now schools are either closed or on Zoom. Which is very hard on our younger daughter who is expected to teach her classes in Anthropology at Brandeis Univ. by Zoom, and her two boys in grades 5 and 8, all at the same time. We old folk have it easy.”

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Bear,

Maybe the ZM question is all about perspective.

I note that in your example, you felt like 100% growth at 40 PS was “too much”.

Yet, I believe you are a proponent and supporting of DDOG, first buying close to IPO. DDOG is currently at its lowest P/S of 26 with 85% decelerating growth. Pre-COVID, DDOG was a 35-40 P/S with the same growth.

Now, is it true that DDOG is a much smaller company, absolutely. But… what is the TAM of DDOG (an application logging tool in a crowded market) vs ZM who is literally replacing conference call systems throughout the ENTIRE enterprise and education system… today… currently… right now as we speak. They are even replacing entire phone systems. It is now or never for ZM. It’s wild.

I’ve never seen so much free marketing in my life. And I am… anxiously… looking to add. I feel there is likely a short-term bubble… but I more importantly feel like there has never been a free sales motion such that we are seeing here. It is viral. Zoom is the verb for conference call.

This is my perspective of your concern with ZM vs. Saul’s excitement. If ZM is indeed still growing at 100% in 3 years then the prices will be higher than today.

However, I’m inclined to believe it pulls back at some point. Or perhaps not.

Either way, this must be how AMZN felt in the early days I have to imagine. Will it, won’t it, it can’t, could it?

Just a Fool

Came across this article on Twitter this am that reinforces the idea Covid 19 is creating a paradigm shift. Take a look at Zoom’s growth in the appealie link.

Looks like Denny has already aligned his portfolio towards this trend.

https://learn.g2.com/coronavirus-changes-the-way-we-use-soft…

https://twitter.com/appealie/status/1242221735216209921?s=21…

Hope I didn’t screw up the links🤔
Be Well,
Dwight

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Looks like Denny has already aligned his portfolio towards this trend.

Yes! I was working from home in Caracas, Venezuela since the mid 1990s. I “met” my designer partner right here at TMF. He lived in New Zealand. My server was in Los Angeles, California. I collected my fees via a service in San Francisco, California, they mailed my checks to my broker in NYC. Our clients were spread around the world, Caracas, Chicago, London, Norway, Australia, and New Zealand.

What covid-19 has done is to accelerate the inevitable. According to the linked article, telemedicine is the second fastest growing sector. Where human life is involved, screwups are not permissible. Teleservices need intensive monitoring. I’m researching DataDog as my sixth teleposition. I’ll write it up as soon as I can.

Denny Schlesinger

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(Also, epic is ~28% of US hospitals: https://www.beckershospitalreview.com/ehrs/klas-epic-cerner-…… )

Maybe epic and cerner combined are 80 then? Not sure, I know I’ve seen that somewhere. I know Epic dominates in large hospitals as well.

MC

The New York Historical Society, which is actually a rather large museum right next to the American Museum of Natural History, just sent me this announcement.
Saul

ONLINE CLASSES
History @ Home
Dear Friends,
Stay engaged with history! Sign up for History @ Home, our free online social studies program series for parents, teachers, and students of all grade levels. New-York Historical educators conduct classes in real-time on Zoom, a web-based video conferencing tool that allows students and educators to interact online…

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People are massively underestimating how long we will live with this virus, and the implications that extend well beyond the virus itself. We are going to be under a fairly strict quarantine for 1-2 months (I’m on week 2 here in Europe, with at least 3 more weeks to go, minimum), and even after that we’ll see more and more government mandated restrictions that effectively limit travel, require a 2-week self-quarantine when returning from abroad, etc., etc. I think limited mobility in some form or another will be our lives for at least the next 1-2 years. And that’s assuming things go well…

I am seeing lots of companies scramble now to move to Zoom and restructure how they interact with clients. I’m starting to hear Zoom used interchangeably with a video call. A comedian I follow on Twitter was just tweeting about a Zoom stand-up night she did with other comedians that was well received, something they plan to repeat each week. I see more and more LinkedIn posts about Zoom trainings, Zoom tips, etc., as a service industry forms around the technology.

Perhaps OT, but in regards to this pandemic, I can’t shake the feeling we are witnessing something incredibly profound. An event that will reshape society in fundamental ways, restructure how we interact with each other, communicate with each other, what we value. Even more so than any other event in my lifetime, and I’m not young. There is not going to be “business as usual” when this is all over.

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What anyone is willing to pay for ZM or any other company is their own decision. What I’ve learned from the board is that you can come up with projections but in most cases those on the board don’t stick around for the end game, instead getting out once growth rates decline. ZM may never become the 200b company but as growth and valuation decline there will be opportunities to exit, likely with a nice profit. Growth rates next year will probably slow given the massive growth expected for now, so maybe this is a 1 year investment.

FWIW, the “law of large numbers” relates to repeated sampling reverting to the true mean, not the size of the numbers. There’s no rule that something growing at 80% needs to slow down. That’s just a function of a limited market, and is not the law of large numbers, at least in the mathematical sense (I get the meaning colloquially).

One of our hospitals, part of a large corporation with 150+ hospitals last I checked, sent out an email saying they are holding an emergency medical staff meeting on Zoom. They’ve never done a virtual meeting before. Surely they will be paying something, these meetings last an hour or so and you can’t expect everyone to log out and log back in halfway through.

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What I’ve learned from the board is that you can come up with projections but in most cases those on the board don’t stick around for the end game, instead getting out once growth rates decline.

That’s what the “S” curve tells you to do!

FWIW, the “law of large numbers” relates to repeated sampling reverting to the true mean, not the size of the numbers. There’s no rule that something growing at 80% needs to slow down. That’s just a function of a limited market, and is not the law of large numbers, at least in the mathematical sense (I get the meaning colloquially).

That’s what I thought but when I looked it up it seems there are two laws of large numbers…

Surely they will be paying something, these meetings last an hour or so and you can’t expect everyone to log out and log back in halfway through.

When something is mission critical, people pay.

Denny Schlesinger

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Very good point IRDoc. There is a good likelihood that astute folks will get out while the gettin’s good. I however am not that astute and would likely follow it down into the chasm!
Of course, I’m not suggesting that Zoom will fall as much as pointing out my own flaws.

As to the law of large numbers, you are correct at least in the traditional sense.
That is how the casino is guaranteed to make lots of money!
Vegas had that law figured out long ago.

None of this changes “S” curve, but the “S” curve has its own issues. How the heck does one judge their point on the curve?

A.J.

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With all this talk of the S Curve, we never know where we are at on it, how far it will go or how long it will be. We still just have growth rates to look at.

It’s a nice little buzzword but not very helpful to tell us when growth has peaked.

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None of this changes “S” curve, but the “S” curve has its own issues. How the heck does one judge their point on the curve?

Not an exact science by any means, market penetration, revenue grow rate, stock price charts…

Denny Schlesinger

Forms
FWIW, the “law of large numbers” relates to repeated sampling reverting to the true mean, not the size of the numbers. There’s no rule that something growing at 80% needs to slow down. That’s just a function of a limited market, and is not the law of large numbers, at least in the mathematical sense (I get the meaning colloquially).

That’s what I thought but when I looked it up it seems there are two laws of large numbers…

captaincc et.al.

Just to clarify- the law of large numbers says that the larger the sample size the greater the probability that the calculated average approaches the “true” mean.The two versions of the law as a
matter of practical application say the same thing. The second version (or the first depending on your viewpoint) was ginned up by mathematicians to address questions involving an infinite sample. This doesn’t usually apply to anything.The following is a Wikipedia extract if you wish you can get the same information from an appropriate textbook or two.

There are two different versions of the law of large numbers that are described below. They are called the strong law of large numbers and the weak law of large numbers.[13][1] Stated for the case where X1, X2, … is an infinite sequence of i.i.d. Lebesgue integrable random variables with expected value E(X1) = E(X2) = …= µ, both versions of the law state that – with virtual certainty – the sample average
converges to the expected value

None of this changes “S” curve, but the “S” curve has its own issues. How the heck does one judge their point on the curve?

phoolio18

It is possible to calculate the point on an S curve where the rate of increase is zero, provided you have sufficient data and a good representation of the curve itself. I suspect that some hedge funds or other money managers have exactly that.

For us,poor fools that we are, our best judgement will have to suffice. My plan would be begin selling
while the curve still has a positive slope and plan to sell systematically 'You would need an inside and outside estimate of the time span for the ‘life’ of the curve which is again a judgement call, but based upon the information forthcoming on this board I think it can be pretty well estimated for almost any case

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