by Ian Harvey
June 02, 2020
Zoom shares climbed by more than 14% on Monday. The video conferencing company released some sought-after software updates, and its upcoming earnings results are look forward to.
And, Stock Options Made Easy “Earnings Predictions” Members are up 180.5% potential profit based on a CALL OPTIONS trade.
The stock market continued to gain ground on Monday, lifted by optimism that coronavirus-inspired shutdowns will continue to lift and stop weighing on economic recovery.
And, not to be left out Zoom shares were also flying, up more than 14%, because - besides those listed below in the recommended trade for “Earnings Predictions Members” - rolled out a security update over the weekend that will provide stronger encryption for video calls to its paying customers. While some organizations, such as schools, will also receive these security features, most non-paying users will not.
The strategy could drive more free users to upgrade their accounts. That, in turn, could help to fuel Zoom's already impressive sales growth. The technology company's revenue soared 88% to $622.7 million in fiscal 2020, which ended on Jan. 31.
“Earnings Predictions” Members executed a trade on Zoom on Monday morning, June 01, 2020 at a cost of $8; and the sell value of the option hit $22.44 during the trading day – a potential profit of 180.5%.
The recommended “Earnings Predictions” options trade - ** Buy the ZM JUN 19 2020 200.000 CALL at approximately $7.50. (Actually bought for $8.00)
The Recommended Trade…..
“Zoom Video Communications Inc (NASDAQ: ZM), providing video-first communications platform primarily in the Americas, the Asia Pacific, Europe, the Middle East and Africa, will report earnings after the market closes. The consensus earnings estimate is for $0.09 per share on revenue of $203.02 million; but the Whisper number is a fraction higher at $0.10 per share.
The company's guidance was for earnings of approximately $0.10 per share on revenue of $199.00 million to $201.00 million. Consensus estimates are for year-over-year revenue growth of 66.43%.
Zoom shares results for the fourth quarter fiscal 2020 in early March were excellent, with quarterly sales up 78% and fiscal-year sales up 88%. The company closed its fiscal year—ended on Jan. 31—with roughly 82,000 customers with more than 10 employees, up 61%.
Zoom shares was one of the first superstar coronavirus stocks and it has remained a stay-at-home standout. Zoom enables people to connect via video, voice, chat, and content sharing. ZM’s offerings were already attractive in today’s globally and digitally connected world. And the coronavirus, which has forced millions of people to work from home and social distance, helped highlight its utility.
The stock is up 133% during the last six months and 64% in the last three months alone. Investor optimism for the videoconferencing company is fueled both by its strong business performance before the coronavirus pandemic and Zoom's perfect positioning to benefit from the rise of work-from-home trends during the pandemic.
The global pandemic has helped Zoom’s usage skyrocket from 10 million daily meeting participants, both free and paid, at the end of December to over 200 million in March.
Overall earnings estimates have been revised higher since the company's last earnings release.
The coronavirus-induced work-from-home and online-learning wave has benefited Zoom.
Zoom’s freemium business model helps it win customers rapidly, which it can later convert into paying customers. The net dollar expansion rate on a trailing twelve-month (TTM) basis was more than 130% in fourth-quarter fiscal 2020.
The company’s efforts to eliminate the security and privacy loopholes like “zoombombing” is expected to have helped it maintain the existing enterprise user base as well as attract new customers.
The company is already generating substantial free cash flow, or operating cash flow less capital expenditures. Free cash flow in fiscal 2020 was $114 million, up from $23 million in fiscal 2019.
Zoom Video’s strong partner base that includes the likes of Atlassian TEAM and Dropbox is beneficial.
The company’s expanding international footprint is a major driver. Earlier in March, Zoom Video announced the availability of its Zoom Phone cloud service in 11 additional countries (total 17 countries and one territory).
Zoom's guidance, relative to Wall Street's expectations, will probably be the biggest factor in the stock's reaction to the upcoming release.
For Q2, analysts are modeling for adjusted EPS of $0.11 on revenue of $222.4 million, representing growth of 38% and 53%, respectively, year over year.
Given Zoom issued its guidance for the full fiscal year just before the coronavirus crisis exploded, investors can likely expect management to raise its full-year outlook -- at least for revenue. That said, it's possible that Zoom will simply pull its previously issued full-year guidance, citing uncertainty surrounding the pandemic.
Zoom shares has averaged a 10.8% move on earnings in recent quarters.”
The coronavirus pandemic and its related shutdown of a huge swath of the global economy have forced hundreds of millions of people to use Zoom's platform to communicate. Although the company has had its share of glitches during the ramp-up period, Zoom has done a good job of responding to concerns on issues like security while keeping the service up and running despite the huge uptick in traffic.
Zoom has become a very big part of our lives. The ease with which it works, the "fremium" model and now the heightened security to curtail the Zoom bombing, all make this the obvious of choices to benefit.
In a security update over the weekend, Zoom confirmed the plan, noting that all users would have 256-bit GCM encryption regardless of the license type as of May 30. Alex Stamos, Facebook's former security chief and Zoom consultant, said Zoom made the decision based on technology, safety, and business factors, though the plan to limit stronger encryption to only paying customers could change.
"At the same time that Zoom is trying to improve security, they are also significantly upgrading their trust and safety," Stamos said. "The CEO is looking at different arguments. The current plan is paid customers plus enterprise accounts where the company knows who they are."
Zoom shares once again led the Nasdaq 100 stocks higher yesterday.
With the video conferencing platform provider set to release its latest financial report on Tuesday, investors are apparently getting a head start in celebrating what everyone believes will be an exceptional quarter.
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An Important Note: That any suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.
It is sometimes best to exit a trade, if there is already sufficient profit accrued, before an earnings report is presented. GREED can be the undoing of a nice profit!