Why Zoom Stock Is Down By 17% Today

Zoom Stock Falls On Growth Concerns

Shares of Zoom found themselves under strong pressure after the company released its third-quarter results.

Zoom reported revenue of $1.05 billion and adjusted earnings of $1.11 per share, beating analyst estimates on both earnings and revenue.

The company has also provided guidance for Q4 fiscal year 2022 and full fiscal year 2022. In Q4, Zoom expects to report revenue of $1.051 billion – $1.053 billion and adjusted earnings of $1.06 – $1.07 per share. In the full fiscal year 2022, total revenue is expected at $4.079 billion – $4.081 billion, while adjusted earnings are expected at $4.84 – $4.85 per share.

Analysts have rushed to decrease their price targets for Zoom stock due to growth concerns, and analyst downgrades have clearly served as additional bearish catalysts for the company’s shares.

What’s Next For Zoom Stock?

Shares of Zoom are down by roughly 65% from highs that were reached back in October 2020, but it remains to be seen whether traders will rush to buy the stock after another pullback.

Analysts expect that Zoom will report earnings of $4.77 per share in the next fiscal year, so the stock is trading at roughly 43 forward P/E. This means that Zoom stock remains expensive even after the massive pullback from historic highs.

Current analyst consensus implies no growth on the earnings side, which is bearish for a growth stock which is trading at a rich valuation. While the company tries to position itself for a hybrid work model in the post-pandemic work, it is not clear whether the market will be patient in case the company does not show material growth in the upcoming quarters.

At this point, it looks that the risks of additional multiple compression remain elevated. In the near term, the stock may find some buyers as its RSI is close to the extremely overbought territory. In the longer-term, the company needs to come up with positive catalysts or its stock will remain under pressure.

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