Zoom Earnings: Stabilization Continues with Positive Indicators, but Fiscal 2025 Guidance Is Lurking

Narrow-moat Zoom reported a good fiscal third quarter, beating our expectations on both the top and bottom lines, while the fourth-quarter outlook was in line with what we anticipated. Key developments this quarter include the continued decline in online average monthly churn to 3.0%, which is a new low and clearly demonstrates the pandemic effects are a thing of the past; a slowdown in in enterprise customer additions, which we think is consistent with continued macroeconomic uncertainty; and approximately 7 million phone seats and 700 contact center customers, both of which are in line with our analysis. Given in-line guidance, we see little reason to make material changes to our model, especially ahead of fiscal 2025 guidance, which we expect management to provide on the fourth-quarter earnings call. Thus, we are maintaining our fair value estimate of $89 per share, and see shares as undervalued.