Disappointing performance guidelines dragged stock prices down sharply! Zoom (ZM.US) is strong on the enterprise side and it's hard to hide its weakness, and Wall Street differences are evident

The Zhitong Finance App noticed that the stock price of the video communication platform Zoom (ZM.US) fell about 7% before the market on Wednesday. The previous guidelines given by the company were not as good as expected, which seemed to disappoint investors with higher expectations. Meanwhile, Wall Street analysts also reacted.

For the quarter ending July 31, the cloud-based video conferencing platform reported adjusted earnings per share (EPS) of $1.55, higher than the market consensus estimate of $1.48; revenue increased 4.9% year over year to $1,277 billion, in line with market expectations of $1.27 billion. For the third quarter, Zoom expects revenue of $1.28 billion, in line with market consensus; adjusted earnings per share are expected to be between $1.46 and $1.48 (median of $1.47), below the consensus estimate of $1.50.

For the full fiscal year 2027, Zoom raised its adjusted earnings per share guidance to between $6.08 and $6.12 (median value of $6.10), which is higher than the previous guidance of $5.96 to $6 (median value of $5.98). The market consensus forecast is $6.16. Zoom also raised its revenue outlook to between US$5.09 billion and US$5.10 billion, compared with previous guidance of US$5.08 billion to US$5.09 billion. The market consensus forecast was US$5.09 billion.

Jefferies: Lowered the target price to $116 and maintained the “buy” rating.

Jefferies lowered its target price for the share from $118 to $116 while maintaining a “buy” rating. The bank pointed out that the enterprise business (Enterprise) is showing a healthy trend of accelerated growth, but mixed prospects are suppressing stock prices.

Analysts led by Samad Samana said: “Revenue growth on a fixed exchange rate (CC) scale was +4.7%, exceeding market consensus by 72 basis points (compared with the rolling average of over the past 12 months exceeding 92 basis points), but operating margin was 50 basis points lower than market consensus. The growth rate of corporate business accelerated to +7.8% year-on-year growth, although the online business (Online) still fell short of the standard despite pricing adjustments. The increase in revenue guidance for fiscal year 2027 according to the fixed exchange rate was slightly less than expected in the current quarter, as online business growth was deliberately slowed. The operating profit guidelines remain unchanged. We are not surprised by the 4% post-market decline and believe that positive revisions to the new FY2027 guidance are needed before the stock price can restart.”

Morgan Stanley: Raise target price to $107 to maintain “wait and see” rating

Morgan Stanley raised Zoom's price target from $105 to $107 while maintaining a “hold and see” rating.

Analyst Elizabeth Porter and her team said, “The investment logic of 'platform extension' was strengthened in the second quarter. The corporate business recorded a record growth rate, and widespread product adoption rates drove strong bookings; however, the dynamic top-level funnel of the online business was weak, and the outlook for the second half of the year under a fixed exchange rate was not adjusted, so it is still undecided when the overall growth inflection point will arrive.”

Analysts pointed out that second-quarter results were largely in line with expectations. Corporate business trends strengthened, and corporate revenue growth accelerated to 7.8% year-on-year, the highest level in three years, despite facing headwinds of loss of white-label customers (white-label churn), analysts added.

RBC Capital Markets: Maintaining an “outperforming market” rating and a target price of $130

The Royal Bank of Canada Capital Markets maintains a “outperforming the market” rating and a target price of $130 for Zoom shares.

Analysts led by Rishi Galluria said, “Zoom's second-quarter results were steady. Revenue, bill revenue, and non-GAAP earnings per share were all higher than consensus expectations, while non-GAAP operating margins fell short of consensus expectations. FY2027 revenue and non-GAAP operating profit guidelines are in line with market consensus. Although second-quarter revenue exceeded expectations by 0.7%, lower than the average of 1.3% in the previous four quarters; however, non-GAAP earnings per share and free cash flow (FCF) both exceeded expectations.”