Analyst Note| Dan Romanoff, CPA |
No-moat Zoom continues to blow past investor expectations with significant upside compared to guidance while delivering a better outlook that leaves room for upside over the coming quarters, especially on the margin front, in our opinion. The video-first communications platform company continues to penetrate the market by leveraging its cloud-based solutions’ ease of use and innovative features, such as OnZoom and Zapps, both introduced at Zoomtopia in November of last year. We see a long runway for growth as the company gains traction with Zoom Phone and evolves its main application to a communication platform, and we are impressed by management’s ability to overdeliver in terms of both growth and margins. Given exceptional results, strong guidance, and our annual model roll, we are once again raising our estimates, which drives our fair value estimate to $223 per share from $176. We still view shares as overvalued.