Zoom results - my thoughts

If you don’t see what’s disappointing about going from 102% growth to 17% growth in a single quarter, I simply don’t know what to say to you.

Sequential % Revenue Increase

                                                                  
FY 2020          15     20      14    13             
FY 2021          74    102      17

No offense, but cherry picking what are arguably outlier values (your own data shows that), and casting shadows on what has proven to be a sprightly, agile company, is premature.

IF COVID declines, and its threat nullified (something I find doubtful) business travel won’t seriously displace ZM. Conferencing is efficient and simple. Wasting time in airports and hotels for a meeting was never a choice, as video conferencing was limited in the past. No longer is that true.

🆁🅶🅱
post tenebras lux
For not in my bow do I trust, nor can my sword save me.

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I find these posts to be very helpful and appreciate having my perceptions challenged.

Also like to remind myself that even if Saul reduced his position to 5%, that is likely the size of my entire portfolio.
Reducing one’s conviction and allocation is different than if he said, “They’re done. I’m out.”
When he completely sells out, I will take that very seriously.

Ronjob commented with a heading Perception vs Reality.
That Microsoft uses their own in house product of Teams is not particularly surprising.
Am sure they also use Excel and Word and not Apple’s “Numbers” or “Pages.”

I do agree with Ronjob that Zoom’s future success will be dependent on their ability to expand the enterprise market.
Currently the market’s sentiment seems to be that Zoom will struggle in growing that segment.
Stock prices are absolutely dependent on perception.
Zoom’s share price is going down because so many share that sentiment.

A wise man posted this in a previous thread.
I stumbled on an interesting and astounding statistic which you might miss. Zoom’s over $100,000 customers were 1289 this quarter, and were 988 last quarter sequentially. That means that they increased their number of big customers by 30.4% SEQUENTIALLY!!! Read that again! It really astounded me. And this is a trailing twelve months figure, not an annual recurring revenue figure, so it’s not even counting many new $30,000 or $40,000 per quarter customers, because they don’t have $100,000 yet looking backwards. Interesting…

Personally I believe Zoom will succeed and have many successes within the Global 2000 in the next conference call.
We shall see if this is correct and the current Perception changes.

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While one could say ZM’s growth is priced in, it’s not being valued as if it were growing 300%. When it was at $550+ it was being valued more similarly to companies growing 90-100%, and now it’s more like companies growing 70% or so (I am thinking 40x annualized revenue). Its great rise this year was not because of growth rate but simply reflecting actual growth. Moving forward, if it grows at 15% sequentially (75% annual growth) then it’s not much different from CRWD or DDOG except that it makes a lot more revenue.

If they actually slow to 5-10% sequential growth then they should probably be valued much less. Based on their 3rd quarter, their sequential growth is essentially back to where the pandemic started but with a much higher revenue base.

Maybe it’s no longer worthy of a massively outsized position, depending on whether you think Zoom is just a pandemic driven tool that will fall back into the pack or if Zoom is revolutionizing business communications.

Personally, I’ll be most interested in their sequential growth next quarter.

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At this point all of this information and the different reductions in a previously maximum conviction company has me confused.

True, Zoom is currently my worst investment ever, since I started very “late”, averaging down from a much higher cost basis and am now in the red.

But from all the different information sources that I use I still feel like I should just stay the course. Nevertheless, I still got bloody worried and reduced the position size (at a loss) down to a “large” one (for my portfolio).

I started investing in early May, with a variety of approaches I tried over this very short time period.

I realized that my YTD performance is now worse than simply holding the S&P 500 from March lows. And much, much worse than holding e.g. ARK ETFs. While my portfolio is filled with most of the growth names discussed. With this style of investing, timing matters. Ninja-like AH moves that require lots of experience matter. It is not possible to “just follow” whatever people do here, I realize that. And it is not for me. It is very toxic trying to compare to other people’s returns, especially since I’m so new to everything.

I’m overwhelmed with this Zoom situation and can’t decide the best course of action, so inaction it shall be. I Foolishly keep 20 positions (including some ETFs) in my portfolio, most of which are still doing great.
I still believe that Zoom will continue to stay relevant and grow revenue at a brisk pace.

long Zoom (still 6.5% after trimming from 9% at a loss).

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At this point all of this information and the different reductions in a previously maximum conviction company has me confused.

True, Zoom is currently my worst investment ever, since I started very “late”, averaging down from a much higher cost basis and am now in the red.

RevTK, you are anchoring with Zoom. The day you started buying ZM is irrelevant to Zoom’s future. What counts is the future. If you can get over the anchoring, not easy by any means, you’ll be in a better position to decide what to do with your portfolio.

Denny Schlesinger

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Hi RevTK,
Mistakes happen. We are not saint and all make mistakes once a while. If you make one mistake and give up, how can you become better? As I child, how many times you fell down the bicycle before you learned to ride it? (Without the supporting wheels on the side). If you fall once, and give up, you’ll never learn to ride a bicycle. Same with investing in growth stocks.

Even I still make mistakes after investing for 14 years. Sometimes, I even repeat the same mistake more than once. But I try my best not to repeat them.

Recently, I bought into PLTR at $32. Watching it go up 20% a day, fear of missing out and i want to ride the train. This is not growth stock investing is about! We invest in growth stocks based on both fundamentals and share price not just on share price alone. Not long after, I realized the emotion got the better of me. The rational me think PLTR is a 40% grower and doubling, tripling in the stock price in one month just doesn’t make sense. it’s all based on HOPE and HYPE. Even it’s a tiny position of 2.5%, I sold out at a loss and moved on. just put my attention back to good companies.

Another example is BIGC. I didn’t buy into it. I’ll use it as example don’t just follow stock price alone. BIGC is a 40% to 50% grower. 18 to 19 YoY revenue growth rate is just ~20%. Its share price doubled in matter of one week. It’s insanity. And the stock price crashed down shortly after.

SNOW is very popular. It’s a 100% grower. The stock price went up 30% in 1 month. It’s perfectly normal. 30% vs 100% is a small number so I gradually built a full position over one month.

ZM was a 100% grower. It grew 500% this year alone. So you need to notice the unusual things and question them.

.

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Take a moment to read the entirety of the Tweet linked below. Consider the evaluation of YoY growth as well as sequential quarterly growth as depicted in both the bar chart and scatter plot graphs embedded in the Tweet and the story they tell about many of the companies discussed on this board. This thread has focused on Zoom but the concepts and metrics discussed speak to all of the WFH fliers discussed here.

Unless I interpret this information incorrectly, which is entirely possible, it appears that Zoom continues to win and lead our cadre of companies.

I am truly interested in responses.

Harley

https://twitter.com/jaminball/status/1337174904861458435?s=2…

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I am truly interested in responses.

Harley

https://twitter.com/jaminball/status/1337174904861458435/pho…

Above I said that 17% quarterly is 87% annually and the twitter chart shows that Zoom has the largest quarterly percentage increase. Fool DCCD says that Zoom has a good chance of becoming a platform company. In a sense it already is, lots of online healthcare services are based on Zoom.

https://discussion.fool.com/zoom-why-the-free-users-are-big-asse…

While Y/Y comparisons will be difficult for the next few quarters I believe Zoom’s covid-19 popularity is still in force although we won’t see a new 200 fold Q/Q increase in users. I’m watching Zoom carefully but neither adding nor panicking until further notice.

Denny Schlesinger

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I just want to add one small piece of information concerning large corporations’ penetration for Zoom. My husband recently had a job interview with Oracle, and it was conducted through Zoom. I guess large corporations still need Zoom to connect ppl outside their companies whatever they use inside.

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Mike wrote:

Okay, Zoom growth is going to slow, but let’s not get carried away. Assuming we all go back to the office, do we all go back to the same office? Not for me, and I suspect not for many. We have offices all over the country and the world.

Other than people walking into my office, I had very few in person meetings. Similarly, my firm cut down on business travel well before covid. I used to have telephone conferences all day. Those calls are now mainly Zoom calls and will continue to be Zoom calls now. How about calls with people outside your firms? I think the vast majority of those calls will also continue to be Zoom calls. If 20% more of the workforce works from home on a rotating basis going forward (accelerated shift as a result of covid), you will need to do Zoom calls with the group that includes them. I don’t think the cut back will be nearly as big a people think. People will continue to use Zoom.

This is certainly my experience. I work for a large organization (2,000+ users) which had Zoom licenses for about half of employees pre-pandemic and almost all employees from March on. Probably by 2022, work will return to close to normal in terms of a resumption of travel and in-office meetings. But this won’t hurt Zoom at all, because some things have changed that will never change back.

Pre-pandemic, even though we all had access to Zoom, conference calls were all by dial-in. They aren’t going back. Pre-pandemic, when we wanted to talk to someone directly, we called them, either on their office phone or their cell phone. And we were all still mostly communicating by cell through June or July, even though we could have been Zooming. But now, everyone just Zooms each other for one-on-one communication. That isn’t changing when we get back in the office. In fact, we are discontinuing our Verizon phone service and switching to Zoom Phone, effective January. Many employees will not have physical phones at all when we return to the office; everything will be done by Zoom Phone. For us, this is Zoom gaining revenue that would have gone not just to Verizon, but also to Cisco, which provides (1) our current voice-over-i.p. handsets and speaker phones, and (2) Jabber, our “soft-phone” solution. Other organizations in our space will follow.

I note also that Zoom’s chat function is superior to Teams and will likely also take share from Slack. The key to Zoom’s success, on an enterprise basis, is that the product is better. That is why people are using it even though everyone has Teams also.

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Hi Mnadel,

I note also that Zoom’s chat function is superior to Teams and will likely also take share from Slack. The key to Zoom’s success, on an enterprise basis, is that the product is better. That is why people are using it even though everyone has Teams also.

Do you think Zoom is taking market share from Twilio also? Does your company use Twilio at all?

Thank you,
Andy

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Twilio is a bit of a different beast - it is a play on enterprise communications. I do think the competition form Teams is fierce. All of the Wall St banks I am working with are officially moving from Zoom to Teams - it integrates better with enterprise infrastructure and is built for security. Even where Zoom is being used for video chat, we aren’t allowed to use it for screen sharing, due to security concerns. I think Microsoft is making a fierce move in this space. Of course all this is really not as relevant as Saul’s comment on going from 107-17% quarterly growth, and how for the next year annual growth won’t be relevant - that is the real answer. The price exploded because use and revenue exploded. The multiple partly reflects that expectation. Coming down to 87%growth annually vs quarterly is going to affect the earning multiple, and even if you love the company, it might make sense to get out until the market has readjusted expectations.

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Even where Zoom is being used for video chat, we aren’t allowed to use it for screen sharing, due to security concerns.

I think they have this backwards …

I recently watched the MF interview with Beth Kindig. She stated that she would never use teams as they don’t have end-to-end encryption (like zoom and Webex) and never will, as Microsoft wants to track the communications and scrape data.

Seems like security should be an advantage for zoom

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