Zoom Shares Are Setting a Base and Will Be Higher This Year
In a world of social distancing and home working, video-conferencing providers have enjoyed a surge in user numbers. But not all investors are convinced of the company’s potential, including Morningstar analyst Dan Romanoff, who cites the free-user model, stiff competition and embarrassing security breaches as reasons to be wary. However, Romanoff is sceptical that Zoom will be able to convert enough of these free users to fully paid-up members within a reasonable time frame to justify the stock’s current valuation.
Zoom chief executive Eric Yuan was forced into damage control following widespread reports of trolls sabotaging meetings by interjecting porn. Still, there have been some impressive figures.
But the security scare has also robbed it of some high-profile users; Elon Musk has banned Tesla and SpaceX from using it, and the 1. Video conferencing platforms offer video and audio calls, one-to-one meetings, group conferencing, collaboration and productivity apps, and a usually secure interface. Unlike other young companies, Zoom is profitable, has a strong balance sheet and is tipped for growth.
But, as Romanoff notes, management concedes the jump in usage from free users during the pandemic has produced no significant boost to revenue. Zoom Meetings is the core platform; it includes individual and group video conferencing, screen sharing, audio conferencing, searchable and archived transcripts, chat, and file sharing.
This starts with generating buzz and familiarity with free users, while the direct salesforce sells to enterprise accounts. In this sense, it relies on viral adoption, whereby an increase in free users eventually leads to a customer signing on to access extra features.
While Zoom is expected to produce relatively higher revenue growth, the higher absolute valuation offers less room for missteps and therefore carries greater inherent risks.
And because its freemium model revenue is concentrated among the largest customers, there is also higher churn among smaller customers. Management does not disclose churn statistics, but Romanoff thinks the nature of the model would dictate higher churn than fully paid enterprise software models.
And then there is the risk of competition. Larger companies, such as Cisco and Microsoft, can bundle a number of solutions together with video conferencing and, like Zoom, also offer a free version of their products.
And as the company expands Zoom Phone, Romanoff expects increased competition from legacy and modern cloud-based private phone providers, such as Avaya, RingCentral, and 8×8.
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Personal Finance. Financial Advisers. Lex Hall 28 April, PM. Free Model Doesn’t Pay Video conferencing platforms offer video and audio calls, one-to-one meetings, group conferencing, collaboration and productivity apps, and a usually secure interface. Valuation Risks While Zoom is expected to produce relatively higher revenue growth, the higher absolute valuation offers less room for missteps and therefore carries greater inherent risks. This article first appeared on Morningstar Australia.
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Are zoom shares a buy – none: –
I thought we had official monthly Fed meetings to discuss these things, but I guess I was wrong. Premium Services. Calculated by Time-Weighted Return since Nu Holdings Ltd 1. Zoom Video Communications, Inc. Nikkei 27, The Independent.