Zoom’s stellar growth is propelling it towards becoming a $100bn company, says GlobalData

Following the announcement of Zoom’s results for the first quarter of fiscal 2021;

David Bicknell, Principal Analyst in the Thematic Research Team at GlobalData, a leading data and analytics company, offers his view:

“Zoom’s videoconferencing made it a poster child of the pandemic and its current rate of growth will propel it towards a valuation of $100bn. Its current market capitalization on June 2 2020 is around $58.6bn – over 94 times its fiscal 2020 revenues of $622.7m.

“Zoom’s standout first quarter reflects how reliant businesses, schools and families have become on the platform due to the unique circumstances created by COVID-19. Zoom’s stock is now worth more than five times the company’s initial public offering price of $36, and that is reflected in its ranking in GlobalData’s Application Software valuation screen, which tells us whether publicly-listed players appear cheap or expensive relative to their peers based on selected valuation metrics. Zoom is placed 47th out of 56 publicly listed application software companies, suggesting that its stock is currently very expensive.

“The interest in Zoom’s results attracted 3,000 analysts to the company’s conference call – three times the number that turned up for an earnings call last year. Zoom’s total revenue for the three months to the end of April 2020 was $328.2m, up 169% on the same period of the previous year. The company expects revenues for fiscal 2021 will be $1.8bn, double its previous guidance of $915m.

“Six weeks ago, Zoom was facing scrutiny into its security and privacy policies. Those security worries haven’t gone away, but they don’t appear to have significantly damaged customer trust in Zoom’s software. It now has 265,400 enterprise customers with more than ten employees – up approximately 354% from the same quarter in its last fiscal year. “Zoom’s hiring of Facebook’s former chief security officer Alex Stamos as a consultant and the introduction of a 90-day improvement plan bought it goodwill with customers, who have continued to trust the company with their business in the pandemic. Although Zoom has predicted churn among its smaller customers, the company’s results may now persuade large enterprises not already using Zoom to rethink their videoconferencing plans.”

Market values as at 2 June 2020. Key: Green denotes that the company is cheap (15% more attractively priced than the median value for the sector) relative to its global peers; amber denotes it is within 15% of the sector median value; and red denotes that it is expensive relative to its global peers. Private companies are shown at the bottom of these rankings by default because they do not have a publicly listed market price.

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