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ZM – Market expectations are for Uniform ROA to reach new highs, but management may have concerns about customer growth, platform opportunities, and their product ecosystem

March 31, 2021

  • Zoom Video Communications, Inc. (ZM:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 105.3x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about customer growth, virtual event platform opportunities, and the Zoom ecosystem
  • Specifically, management may lack confidence in their ability to strengthen their customer relationships, sustain customer growth, and manage their G&A costs. They may also be exaggerating the growth opportunities in the virtual event platform market, the potential of OnZoom, and the sustainability of their revenue expansion. Furthermore, management may lack confidence in their ability to find accretive acquisitions, maintain their platform’s privacy and security capabilities, and view their business from a customer’s perspective. Moreover, they may be overstating the potential of a collaboration with Microsoft, the strength of their online and direct businesses, and the availability of opportunities to expand the Zoom ecosystem. Finally, they may lack confidence in their ability to meet their EPS outlook and continue to sell into their installed base