Zoom video communication
Shares have improved since the company offered 5.15 million shares at $ 340 each, after earning $ 1.75 billion before the company’s expenses. It is slightly larger than the originally targeted $ 1.5 billion.
The offering would almost double the company’s cash and marketable securities, which stood at $ 1.87 billion at the end of the October quarter. There is no long-term debt on Zoom (ticker: ZM).
Stifel analyst Tom Roderick says the deal adds financial flexibility, but he thinks the company will have to exceed the total to achieve substantial growth through acquisitions. “whereas [the company now has] A large-sized war chest does not put cash such as necessary targets alone.
Without a huge component of stock in such a deal, ”he wrote. “As Zoom builds on its global scale, a 10-figure war chest of cash will also be beneficial for aggressive infrastructure build-out as needed.”
Roderick noted that the company revealed on Tuesday that it had reached one million users for its cloud-based zoom phone service.
“Zoom has made remarkable progress in short order with the Zoom phone,” he wrote, noting that the service is just two years old. “Looking ahead, we expect that Zoom will focus on expanding its relationships with customers and expanding sales opportunities with current video epidemic through the company’s growing product suite.” Roderick kept a hold rating on the stock, with a target of $ 450 for the price.
Meanwhile, Morgan Stanley analyst Meta Marshall reiterated its equal weight rating and price target of $ 390. But he said he feels investors are deeply disappointed about Kovid’s approach.
“While we were once cautious that the assessment was ahead [the long-term] Opportunity, about 40% away from the high, we think the market has turned a bit negative, ”Marshall wrote. She said that data from the zoom phone shows how quickly the platform can add applications, a factor she said investors feel has been missed.
Marshall said she hopes Zoom will use the money she has raised to expand the services the platform offers.
“We will note that the company has not said anything publicly about the potential M&A, but that platform expansion, similar to what they have done with the phone, is part of the way they demonetize their established base. Makes sense, ”she wrote. “We think that 400–450 million enterprise customers are the most attractive of potential customers, with application extensions in this area making the most sense to us.”
A major beneficiary of the work from the home trend, Zoom’s stock rose over 760% from the end of 2019. Intraday peaked at $ 588.84 on October 19. But all this has been a big selloff, with the stock down more than 40% through Tuesday’s close. Zoom shares were up 5.5% to $ 376.44 late Wednesday evening.
Write Eric J. at [email protected] Savitz