Zoom Video Communications, Inc. (ZM) has experienced soaring growth over the past seven months, dramatically outperforming the S&P 500, leaving it in its dust. The communications technology company moved up on the WhaleWisdom Heatmap to an impressive ranking of three in the second quarter. Hedge funds and institutions have been actively buying Zoom in 2020, resulting in a gain of approximately 339%, compared to the S&P’s increase of about 7.9%.
Consumer demand for Zoom’s cloud-based software platform and online communication tools has increased dramatically due to the coronavirus pandemic, and the need for telecommuting and online education. Families, groups of friends, and social clubs have been turning to communication tools such as Zoom to create real-time connections while social distancing. While many companies have been negatively impacted by the pandemic, for Zoom, there have been lucrative opportunities for a new and expanded customer base.
Zoom Takes Center Stage
Zoom has the attention of hedge fund managers and institutions. Looking at activity by the top hedge funds in the second quarter, the aggregate 13F shares held increased to about 35.7 million from 26.9 million, an increase of approximately 32.3%. Of the hedge funds, 60 created new positions, 34 added to existing holdings, 23 exited, and 33 reduced their stakes. Institutions were also buying, with aggregate holdings increasing by about 30.5% to approximately 107.1 million from 82 million.
Revenue on the Rise
Analysts see immense growth for the company, with earnings estimated to climb to $1.57 per share in 2022, up from $0.35 for 2020. Revenue is predicted to reach approximately $2.8 billion in 2022, up from estimates of $622.7 million in 2020.
Analysts are optimistic about Zoom overall. KeyBanc Capital Markets, Inc.’s analyst, Alex Kurtz, has a favorable outlook for Zoom’s stock, likely recognizing that the demand for collaboration and chat services will continue to be high as the world’s efforts to distance continue during the pandemic, and potentially beyond. Kurtz notes, that while many new Zoom accounts were opened in the summer, some decline is likely to be seen at this stage of the pandemic. Kurtz maintains a Sector Weight rating on the shares. RBC Capital Markets’ analyst, Alex Zukin, raised the stock’s price target to $300 from $250, maintaining an Outperform rating and citing that monthly active users and App downloads are well above historical averages.
Zoom’s impressive growth and future estimates are encouraging for investors. While Zoom continues to face its fair share of competition from other tech companies, and growth may not be able to continue at the current rate, Zoom has undoubtedly benefited from the pandemic, becoming a household name. That brand recognition can go a long way, and the circumstances of the pandemic have influenced consumer practices to include Zoom in their work, learning, and day-to-day personal lives.