In today's world, $Zoom(ZM)$ Zoom has become a household name, just like Google. The popular video communication platform provider has become synonymous with making video calls. It's an excellent tool for remote workers and businesses, especially in these times of a flexible work environment.
Although Zoom has many competitors, it still stands out as the most popular video call platform globally. Studies show that 80 countries (66% of all countries analyzed) have Zoom as their most preferred video call app, with Google Meet and Microsoft Teams completing the top three. Despite these developments, there's still a lot of runway left for Zoom to grow. The company controls approximately 55% of the video conferencing software market alone.
Zoom has had an impressive run over the last few quarters. The company has beaten consensus EPS for four straight quarters. I have attached a summary of the stock past performance the day after it report in earnings in each of the past 4 quarters at the end of the post.
However, the stock has dropped 63.2% in 2022, with a year-to-date gain of 9% in line with the broader market. The earnings report after the market close is likely to create a significant impact on the stock, and I do not expect the market to react well to it.
Day chart of Zoom
It's important to note that Zoom is a tech stock that is highly reactive to overall market sentiment. Based on the daily chart (see chart above), there seems to be a resistance level at 80 and 85, while the support level is around 66. Although the RSI is currently below 50, I plan to buy Put options at 80 expiring next Friday $ZM%2020230310%2080.0%20PUT$ $ZM 20230310 80.0 PUT$ .
Zoom is going as high as 75 (+1.5%) in premarket trading and is expected to fluctuate quite a bit tonight before the earnings announcement after the market closes. Therefore I plan to purchase the Put Option within 10mins of the market opening or when Zoom remains green. It is important to note that this trade is quite risky and should be closed when there is a few hundred dollars of profit. In other words, it's essential to get in and out quickly.
The broader market also has a significant impact on Zoom's stock. The Nasdaq $NASDAQ(.IXIC)$ is currently on a downtrend, and economic data out this week starts with the Census Bureau's durable-goods report for January on Monday. That's often seen as a decent proxy for business investment. On Tuesday, the Conference Board will release its Consumer Confidence Index for March. That's expected to continue an upward trend. However, I don't believe it will change the trajectory of the broader market.
A summary of Zoom stocks performance following its earnings report for the previous four quarters
Fourth Quarter of Year 2021 (Feb 28, 2022): Total revenue of $1,071.4 million, up 21% YoY, with a full fiscal year revenue of $4,099.9 million, up 55% YoY. Number of customers contributing more than $100,000 in trailing 12 months revenue up approximately 66% YoY. Premarket following earnings, Zoom Video dropped 3% but had climbed 5.81% the day before. The day after, it decreased by 7.41%, compared to Nasdaq composite's -1.59%.
First Quarter of Year 2022 (May 23, 2022): Total revenue of $1,073.8 million, up 12% YoY. Number of customers contributing more than $100,000 in trailing 12 months revenue up 46% YoY. Premarket following earnings, Zoom Video rose 6.4%. The day after, it increased by 5.61%, while Nasdaq composite decreased by -2.35%.
Second Quarter of Year 2022 (Aug 22, 2022): Total revenue of $1,099.5 million, up 8% YoY. Number of customers contributing more than $100,000 in trailing 12 months revenue up 37% YoY. Premarket following earnings, Zoom Video fell 11%. The day after, it decreased by 16.54%, compared to Nasdaq composite's -0.00%.
Third Quarter of Year 2022 (Nov 21, 2022): Total revenue of $1,101.9 million, up 5% YoY. Number of customers contributing more than $100,000 in trailing 12 months revenue up 31% YoY. Premarket following earnings, Zoom Video gapped down -9.3%. The day after, it decreased by 3.87%, compared to Nasdaq composite's 1.36%.
Overall, the company's revenue has grown YoY in all four quarters, but the growth rate has slowed down. The number of customers contributing more than $100,000 in trailing 12 months revenue has consistently increased YoY. The stock's performance after earnings has varied, with some days seeing significant drops and others seeing increases.
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