What Happened?
Shares of video conferencing platform Zoom (NASDAQ:ZM) fell 9% in the afternoon session after the company reported underwhelming financial results for the third quarter. Growth remained tepid, though it came in ahead of analysts' estimates, enabling it to also beat on EPS. However, the sales outlook for the full year was underwhelming and roughly in line with expectations. Baked into the outlook are the expectations that the macro environment will continue to be mixed.
On the other hand, Zoom raised its full-year EPS guidance. It also recorded many new large contract wins, which enabled it to beat analysts' revenue, EPS, and adjusted operating income estimates. Overall, this was a mixed yet challenging quarter.
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What The Market Is Telling Us
Zoom’s shares are not very volatile and have only had 4 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 9 months ago when the stock gained 13.5% on the news that the company reported strong fourth-quarter results, with its revenue narrowly outperforming Wall Street's estimates, though EPS beat by a more convincing margin. There was also an acceleration in its new large contract wins. On the other hand, its full-year revenue guidance was below expectations and suggests a slowdown in demand.
Lastly, Zoom demonstrated its focus on driving shareholder returns as its Board of Directors authorized a stock repurchase program of up to $1.5 billion of its common stock. Overall, this was a mixed quarter for Zoom. However, the market reacted very positively to the news of the share buyback.
Zoom is up 19.7% since the beginning of the year, and at $82.73 per share, it is trading close to its 52-week high of $89.03 from November 2024. Investors who bought $1,000 worth of Zoom’s shares 5 years ago would now be looking at an investment worth $1,101.
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