Zoom Video Drops on Slashed Guidance, Downgrade at BTIG on Macro Headwinds

Zoom Video (ZM) Drops on Slashed Guidance, Downgrade at BTIG on Macro Headwinds

By Senad Karaahmetovic

Shares of Zoom Video Communications (NASDAQ:ZM) are down 11% in premarket trading on Tuesday after the communications software company cut its full-year guidance.

Zoom Video reported an adjusted EPS of $1.05 on revenue of $1.10 billion, which compares to estimates of an adjusted EPS of $0.92 on revenue of $1.12 billion.

“While we saw continued momentum with our Enterprise customers and our non-GAAP operating income came in meaningfully higher than our outlook, our revenue was impacted by the strengthening of the U.S. dollar, performance of the online business, and to a lesser extent sales weighted to the backend of the quarter,” said Zoom CFO Kelly Steckelberg.

For this quarter, ZM sees an adjusted EPS between $0.82 and $0.83 while analysts were looking for $0.93. Revenue is seen between $1.095 billion and $1.10 billion, again lower than the consensus of $1.16 billion.

ZM shares were mostly hit by the slashed full-year forecast as the company now expects revenue to come between $4.39 billion to $4.40 billion, which is worse than the prior range of $4.53 billion to $4.55 billion and the Bloomberg consensus of $4.54 billion.

Adjusted EPS is projected in the range of $3.66 and $3.69, slightly lower than the prior outlook of $3.70 to $3.77 and the consensus of $3.76.

ZM shares fell about 9% in after-hours before extending the decline after a BTIG analyst cut the rating to Neutral, citing macro headwinds across online business.

“The pullback in FY23 profitability and FCF is somewhat concerning as topline growth slows further, and thus we are downgrading shares of ZM to Neutral given significantly reduced near-term expectations,” the analyst said in a client note.

A Goldman Sachs analyst cut the price target to $122 from $142 to reflect lowered estimates.

“We believe a favorable mix of steadying core video via Online retention improvement and higher conversion rates coupled with critical mass in Phone and Contact Center could support an inflection point in revenue growth, though timing remains uncertain. Shorter-term, potential downside risk to Online and broader macro-uncertainty into 2H keeps us on the sidelines,” the analyst said in a client note.