Zoom Video Communications, Inc. (ZM) saw exceptional performance over the past year, significantly outperforming the S&P 500 and rising by approximately 400.9% compared to the S&P’s gain of about 39.6% since the start of 2020. The positivity continued as hedge funds and institutions actively bought the stock in the second quarter, aligning with the company’s rise on the WhaleWisdom Heatmap to 2 from 25.
Zoom is a technology company known for its communications platform and video collaboration services. The Zoom platform enables video meetings, webinars, online chats, and calls to facilitate communication and collaboration. Also, while based in the United States, Zoom offers the opportunity for international video conference calls. The company provides a basic level of access for free and a subscription service with a greater array of resources and tools. Subscription fees serve as a significant revenue stream that expanded considerably during the coronavirus pandemic when many businesses and educational institutions were forced to transition to remote work and virtual methods of communication. The trend of telework is likely to continue even as the pandemic concludes, as employers that realized the telework cost-savings and morale benefits now embrace a more permanent hybrid work model.
Hedge Funds Are Buying
Zoom had a favorable second quarter, with hedge funds and institutions adding shares to their portfolios. The aggregate 13F shares held by hedge funds increased to about 45.3 million from 40.3 million, a change of about 12.2%. Of the hedge funds, 30 created new positions, 77 added to an existing stake, 27 exited, and 63 reduced their holdings. Institutions increased their aggregate holdings by about 10.9% to approximately 138.0 million from 124.5 million. The 13F metrics between 2019 and 2021 reflect Zoom’s rising stock price and WhaleWisdom high Heatmap ranking of two.
Positive Multi-year Estimates
Analysts expect to see revenue rise over the next three years, with year-over-year growth ranging from 50.9% to 19% between January 2022 and January 2024. These estimates could bring revenue to $5.7 billion by 2024. Analysts also anticipate a rise in earnings that would bring earnings per share to $4.66 by 2022, $4.74 by 2023, and $5.02 by 2024.
Analysts are predominantly bullish on the stock. Many have likely noted Zoom’s recent August announcement to acquire cloud contact center Five9, Inc. Analyst Steve Enders of KeyBanc Capital Markets upgraded Zoom to overweight and gave it a price target of $428. Enders shared his thoughts that video and cloud communications will be long-term priorities for enterprise information technology to support hybrid work. Morgan Stanley upgraded Zoom’s shares to overweight from an equal weight rating and raised its price target to $400 per share from $360.
Zoom’s history of growth is noteworthy, and the company appears well-positioned to meet the strong demand for its technology. A multi-year outlook for growth brings an additional element for confidence in future performance for this tech company, which should be encouraging for investors.