Zoom Video Communications Fatigue & Growth Forecasts

Zoom Video Communications Fatigue & Growth Forecasts
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During their recent episode of the VALUE: After Hours Podcast, Taylor, Brewster, and Carlisle discussed Zoom Video Communications Inc (NASDAQ:ZM) Fatigue & Growth Forecasts. Here’s an excerpt from the episode:

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Asset ManagementValueWalk’s Raul Panganiban interviews Ross Klein, CFA, and Vince Lorusso. Ross is founder and CIO at Changebridge Capital and Vince is Partner and Portfolio Manager at Changebridge Capital where they manage the CBLS, Changebridge Capital Long/ Short Equity ETF and CBSE, Changebridge Sustainable Equity ETF. The following transcript is computer generated and may contain some Read More

Zoom Video Communications Fatigue & Growth Forecasts

Bill: Here’s what I don’t understand on Zoom Video Communications. Okay. You’ve got huge growth this year, huge. 262%, okay, to $2 billion, we’re trading in 117 billion, so whatever. Lots of time sales for those that want to figure it out. You got them growing consensus is like 40% growth in 2024. Okay, why? 40% is a big number. What’s going to happen in 2024?

I’m looking at it, you got 300% this year, okay, granted, everybody’s locked in. Then next year, we’re somehow going to grow 34% off that base, as if people aren’t using it like crazy right now. And then you come down to 21% and then you pop up to 40%. I’m sure they have some product that they’re releasing or something. I mean, these people aren’t stupid that are modeling it, but how are we going to grow 34% off of this space? Kids are in school on Zoom. You can’t do anything without being on Zoom. We’re going to go 34% of that base?

Tobias: It was one less as of yesterday.

Bill: I can’t wait to get the fuck off Zoom. You’ll see me zero times next year on it.

Tobias: Yeah.

Jake: [laughs]

Bill: Every corporate meeting is on Zoom right now. We’re going to grow off that base? I don’t know, man. I just don’t trust that. Maybe I’m the idiot.

Jake: Here’s the thing. It could work, but you don’t want to make that bet 100 times.

Bill: Yeah. I think that’s right. Your odds offered are really bad. Now, said the same thing last year. [crosstalk]

Jake: You said the same thing 200% ago.

Tobias: Do people get locked in– [crosstalk]

Bill: 200%, dude, it opened the year to $21.3 billion company, now it’s 117.

Tobias: Do people get locked into this– does this network effect eventually occur with everybody’s just on Zoom and it’s just easier to be on Zoom? What do you think–?

Bill: I’m sure a bull would tell you that, right?

Jake: No way, dude. Skype is just as good to me. Google Hangout or Google Meet or whatever, just as good. FaceTime? I mean, I don’t know, whatever, man.

Bill: Well, like all the people that are sitting at home that started a podcast now that are like recording on Zoom. I mean, think of how many things happened on Zoom, because nobody had anything else to do. We’re going to grow 34% off that base?

Tobias: It’s growing 40% between here and 2024. Or, it’s growing 40% in the year 20– 40% per year.

Bill: 2022. This is consensus of Bloomberg. 2022, the year ended 131. 2022, you’re looking at 34% revenue growth. The year ended 131, 2023, 21%. The year ended 131, 2024, 40%.

Tobias: Why does it take off?

Bill: I don’t know. This is what I’m asking.

Jake: Because you need that to get to this valuation.

Tobias: I think I see what I’ve been doing wrong. I’ve been fading[?] these things. I should have been compounding them, accelerating them, accelerating those metrics.

Jake: Yeah, rookie numbers. You need to bump up those rookie numbers.

Tobias: That’s what I’m doing [crosstalk] now.

Bill: If I was underwriting this thing, I’d be like, “Alright, so next year, we figure usage and everything falls off like 30%.” And I’d rebase my estimates from that.

Tobias: Well, maybe that’s what they’re doing.

Bill: I don’t know, you got 7.4 billion of sales, and the year ended 131, 2025. We’ll see, maybe it works. They are doing a lot in phones. I like their Investor Day, seems like a cool company. Better be, they’re selling a lot of dreams for $118 billion. If you don’t know how to sell it to the street, it’s crazy.

Tobias: Oh.

Bill: [laughs]

Jake: Sobering.

Tobias: How’s your Qurate-Zoom Video Communications bet going? Let’s get an update on that.

Bill: I don’t know. I think I’m winning. Who cares? I got two and a half years, man.

Tobias: Yeah, that’s fair. I just wanted to say the inflection point.

Bill: I think I’m pretty certain that Qurate’s ahead.

Jake: I think you’re ahead.

Tobias: It’s going to be tough now. There we go, that’s good. Chalk one up for the old value guys. Not we can take a knee, two and a half years to run on it, but let’s keep going.

Bill: I think [crosstalk] going to have a really good quarter. The stock market being up helps the wealth effect of the consumer. She’s at home. She probably needs some retail therapy. I think they got another–

Tobias: Doing Zoom Video Communications calls.

Bill: Yeah.

Jake: Between Zoom calls. [laughs]

Bill: She’s going to see David, forget about our pain. We’re just selling air fryers.

Jake: [laughs]

Tobias: All right, amigos. That’s right on full time. We’re all going to be here next week.

Bill: Yeah.

Jake: For better or worse.

[laughter]

Bill: That’s right. Yeah, maybe we will say something worth listening to next week.

Jake: Let’s redouble our efforts and come back with something a little better here.

Tobias: All right, fellas.

Bill: I had a great time.

Tobias: See you next week, folks. Ciao.

Jake: Cheers.

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