The results on a study referenced in this article indicate that 1 in 3 Americans use live video to chat with a business, brand or service provider. This is a 3 fold leap in 3 years.
Today, 1 in 4 millennials video chat on a daily basis. It’s a 175% increase in live video usage in the past 3 years.
The older generations use video chat significantly less. The company have worked for the past 14 years, a Fortune 500 company, does not have any video chat process whatsoever. And I don’t video chat myself. The whole concept is alien to me. However, it appears it’s commonplace with millennials, and this is something that SHOULD transition to the workplace, especially with remote users.
So while I don’t know of any studies indicating how a company started using more video after switching to Zoom, the stars are aligned in their favor to possibly have an increase in videoconference usage after switching to a quality product.
There. I at least found something after the whole idea of videoconferencing taking off in the business world sounded so ridiculous to me.
Another part of this is that the enterprise and business world adapted solutions as a necessity but never really embraced the trend or adapted it as a meaningful strategy. The technology adoption curve never truly developed. Zoom is putting this curve on it’s proper path.
For evidence of that we find that when customers switch to Zoom they increase their use of video 85% on average. An impressive stat in my book.
I think that you are right. Our university just signed an exclusive deal with Zoom and we are all being encouraged to use it instead of Webex, Skype and others. Quality seems good so far though we don’t use the video all that often in my team.
I hope that usage justifies a $26b mkt cap, and makes that mkt cap seem low…otherwise, why be invested in ZM at this level?
ZM = MDB+ZS+AYX combined.
I don’t want to come off harshing anyone’s buzz regarding ZM, but the stock seems a head-scratcher at these levels.
We have seen a couple acquisitions recently: Mulesoft, Looker, Tableau. And then we use those examples as a way to put a floor on our stocks by saying “hey…they are at least worth what a company would pay to buy them!”.
But if anyone (AAPL, MSFT, GOOGL, AMZN) with enough funds to actually buy ZM at this level, what would they have to pay? Obviously more than $26b. Lets be super-conservative and say $30b.
How long would it take to make money off that acquisition? It will be years and years before ZM even does $30b in revenues, let alone in profit. If it takes 10-15 years to start getting some ROI (in the form of new clients for your other products, resale value of the asset you bought, and actual income coming in from this new business unit) do you really think in today’s innovation technology cycle, that any company can be guaranteed to hold a competitive advantage over even 5 years, let alone 10 years or 15 years?
In other words: why wouldn’t video conferencing become a commoditized software capability that any company can offer. We already have video conf capability via skype, webex, hangouts, facetime, and more…they can’t improve their products in the next 5-10 years?
Not arguing that their results are awesome. But a 70 P/S gives me pause. That is risky biotech hoping-for-a-miracle-drug territory.
what would they have to pay? Obviously more than $26b. Lets be super-conservative and say $30b. How long would it take to make money off that acquisition? It will be years and years before ZM even does $30b in revenues, let alone in profit… But a 70 P/S gives me pause.
Hi Dreamer,
I’m not sure what your point is here. Why would Zoom have to have $30b in revenue to be worth $30b in market cap. I don’t know any companies that have revenue as high as their market cap, or even near it.
I’m also not sure where you get your $26 billion market cap. In their last earnings they list basic shares at about 110 million shares and diluted shares at about 136 million shares. Even with todays $10 rise in stock price to roughly $105, diluted shares only multiply out to $14.3 billion market cap. Where does $26 million come from.
Then your 70 times revenue? Where in the world does that come from. They had $122 million in revenue this quarter. They’ve been growing revenue at roughly $16 million per quarter sequentially, so assuming no further increase in sequential growth we are looking for the next four quarters at 138 + 154 + 170 + 186 = $648 million in forward revenue. Dividing that into 14.3 billion and I get a forward P/S of only 22.1.
Even if I made some huge mistake and I’m off by 100% and they have magically twice as many shares as they listed in their press release, we are no where near a P/S of 70. Have you been getting your figures from short-sellers?
Second Quarter Fiscal 2020: Total revenue is expected to be between $129 million and $130 million and non-GAAP income from operations is expected to be between $2.0 million and $3.0 million. Q2 non-GAAP EPS is expected to be approximately $0.01 to $0.02 with approximately 301 million non-GAAP weighted average shares outstanding.
For what it’s worth, if you use the 301 million shares Zoom projects for next quarter, you get a higher PS ratio than Dreamer’s 70.
301 * $105 (share price) = $31.6 billion market cap
31.6b divided by 392m (TTM revenue) = a PS ratio of 80.6
Second Quarter Fiscal 2020: Total revenue is expected to be between $129 million and $130 million and non-GAAP income from operations is expected to be between $2.0 million and $3.0 million. Q2 non-GAAP EPS is expected to be approximately $0.01 to $0.02 with approximately 301 million non-GAAP weighted average shares outstanding.
For what it’s worth, if you use the 301 million shares Zoom projects for next quarter, you get a higher PS ratio than Dreamer’s 70.
301 * $105 (share price) = $31.6 billion market cap
31.6b divided by 392m (TTM revenue) = a PS ratio of 80.6
Short answer: talking about how a company that purchases them would measure ROI.
As far as valuation, if my numbers are that far off, then it changes a lot.
But that mkt cap is what you see on fidelity, etrade, morningstar, marketwatch, google finance, etc…
And no need for snarky “have you been getting your figures from short-sellers?” remarks.
Thanks Bear, I was figuring I must have made a mistake somewhere. But using TTM revenue on a company growing at 100% doesn’t make much sense as the figures are way out of date, even compared to the present run rate, which is itself out of date.
Best,
Saul
Maybe what we are seeing at present is a short squeeze. I wouldn’t be surprised.
I too have stayed away from ZM because of how expensive it seems compared to other choices, but I do think there is one issue with your line of reasoning, with respect to ROI to an acquirer.
ZM at $123m current quarterly rev = about $500m annual. Their S&M is at 52% of revenue. If acquired, there would be significant synergies in S&M, since the acquirer would likely seek to synergize that part of the business. So you’re looking at something like 200m(if S&M cut to 10% of revenue) - 250m (completely folding the S&M team into existing S&M) of profit in a relatively short amount of restructure time.
Would not take long to recoup investment if adoption of Zoom continues to grow and if including Zoom makes the acquirer’s own products more attractive as well (more sales from base line of products).
But it wasn’t a matter of being closer. You were literally half the number.
So nothing changes in your view from ZM being $14.5b mkt cap in your mind an hour ago which a 30-35 P/S or so, to now viewing them as a $26-27b mkt cap with a 65-70 P/S?
Not being snarky…that is an honest question.
I would also be very interested in ZM if it was 14.5b mkt cap and about same P/S as Zscaler and MDB, yet growing faster.
But it wasn’t a matter of being closer. You were literally half the number.
So nothing changes in your view from ZM being $14.5b mkt cap in your mind an hour ago which a 30-35 P/S or so, to now viewing them as a $26-27b mkt cap with a 65-70 P/S?
Not being snarky…that is an honest question. I would also be very interested in ZM if it was 14.5b mkt cap and about same P/S as Zscaler and MDB, yet growing faster.
Interesting, this is the same situation as Elastic. Market cap is understated by data services because they are not accounting for “anti-dilutive” shares. It appears Zoom is in the same boat and data services underestimate Zoom’s market cap.
There was a hypothetical question posed a while back on here, that asked what you would do if ZS were to trade at 100x sales. It appears that Zoom is now almost at that (based on trailing sales, though growing faster).
The older generations use video chat significantly less.
Millennials still look good (or as good as they ever will). When you are 75 and laptop camera makes your nose look camelesque, and your face sags, the residual vanity does not promote video usage.
